Despite Opposition From His Closest Advisors And Supporters, Biden Expected To Roll Back China Tariffs As Soon As This Week

Despite Opposition From His Closest Advisors And Supporters, Biden Expected To Roll Back China Tariffs As Soon As This Week

Joe Biden woke up on July 4, failed miserably when trying to read one word from the teleprompter…

… and decided that the most patriotic thing the president could do, was leak that tariffs imposed on China by the Trump administration could be rolled back as soon as this week, a decision which the WSJ said is constrained by competing policy aims: on one hand addressing inflation (because supposedly easing tariffs will somehow shrink inflation) while on the other hand maintaining economic pressure on Beijing, not that that has been a policy goal of Joe Biden, who has become China’s de facto Manchurian candidate courtesy of his son Hunter.

Citing ‘people familiar with the situation’, the Journal writes that what comes next could include a pause on tariffs on consumer goods such as clothing and school supplies, as well as launching a broad framework to allow importers to request tariff waivers.

The Office of the U.S. Trade Representative is conducting a mandatory four-year review of the Trump-era tariffs. A comment period for businesses and others who have benefited from the tariffs will close July 5, giving the administration an opportunity to calibrate its policy.

A tariff rollback would mark Biden’s first major policy step on trade ties between the world’s two biggest economic powers. The president in recent weeks held a number of meetings with senior economic advisers where options for a decision on the Trump-era tariffs were discussed, Bloomberg adds citing its own sources.

Hints that the Biden administration is considering an easing in some of the tariffs on $300 billion in Chinese imports have multiplied as inflation has accelerated, putting pressure on US officials to find ways to tamp down prices paid by consumers for everyday merchandise.

Biden said last month he’ll be talking to Chinese President Xi Jinping “soon” and told reporters he was “in the process” of making up his mind about whether to lift tariffs. Some members of Biden’s Cabinet suggested he use the upcoming call with Xi to ask him for reciprocal tariff cuts on American goods currently facing import duties, though that idea was quickly shot down, the people said.

Meanwhile, as he weighs a decision, Biden has been buffeted by policy disagreements both within his administration, and by outside forces including business, labor and lawmakers, which is why a plan to announce a tariff cut has been repeatedly postponed, as it reflects the “sharp divisions” within his own administration over the China tariffs.

Among his own cabinet, Treasury Secretary Janet Yellen – who recently admitted her cluelessness is behind the most catastrophic inflationary juggernaut unleashed in the US in more than 40 years – has called tariffs a drag on the economy, saying the administration is looking at ways to reconfigure them to help curb inflation. Yellen has said some of the inherited tariffs aren’t strategic and don’t address China’s unfair trade practices.

“Reconfiguring some of those tariffs so they make more sense and reducing unnecessary burdens is something that’s under consideration,” Yellen said in an interview with ABC News on June 19.

Most of Biden’s cronies, however, take the opposite view to that of the senile trasury secretary: on the other side are U.S. Trade Representative Katherine Tai and National security adviser Jake Sullivan, who see tariffs as valuable leverage in getting concessions from China. These skeptics want a tariff cut paired with another measure designed to keep pressure on Beijing to change practices that the U.S. says put American companies and workers at a disadvantage.

Among the possible steps are raising tariffs on strategic items such as industrial machinery and transportation equipment, while lowering duties on consumer goods. The U.S. also could start a fresh investigation under Section 301 of the Trade Act focusing on China’s industrial subsidies on high-tech items, a policy the USTR has been preparing for months.  Such a policy could lead to tariffs on a new set of products.

“From the domestic political perspective, there are two very strong, competing concerns. One is the need to be perceived as fighting inflation. And the other is the need to be seen to be very strong in standing up to China,” said Claire Reade, a longtime China official for the USTR who is now at the law firm Arnold & Porter.

“The question is how do you take all of these divergent concerns and harmonize them into one policy?” she said.

The catalyst behind the highly unpopular decision is an even more unpopular byproduct of the Biden administration – soaring prices. The White House has been struggling in vain to contain the fallout from high prices for food, gas and other consumer items, which will decimate the Democratic Party in the November midterm elections.

Unsurprisingly, economists say removing Chinese tariffs isn’t likely to have a dramatic impact on inflation. Peterson Institute analysts Megan Hogan and Yilin Wang estimate that removing tariffs on Chinese imports could lower consumer-price index inflation by a marginal 0.26 percentage point at first. But “as U.S. corporations trim their markups to compete with imports,” that might eventually lead to a 1-percentage-point reduction in inflation, they added.

Meanwhile republicans including Sen. Bill Hagerty (R., Tenn.) and others have rightfully pointed out that, for more than two years after the tariffs were introduced, there were few signs of inflation or discussions linked to their impact on consumer prices.

“Wouldn’t removing these tariffs simply encourage more bad behavior,” Hagerty asked Tai at a recent hearing. “What kind of message would it send to China?”

At the same time, proponents of tariff reduction – most of them generously funded by China – say it is important for Biden to show he is serious about fighting inflation, possibly by pausing tariffs on consumer goods purchased by American households. As the Federal Reserve is primarily responsible for controlling inflation, tariff reduction is one of the few policy options available to the president. Biden himself has said in recent weeks that he is considering a tariff cut, noting that the levies were introduced by the previous administration.

Of course, this being the Biden administration where every incremental decision only lead to more chaos and pain, a decision to drop tariffs would only lead to even more acute attacks on the White House as it was Biden’s own advisors such as Tai (previously appointed by Biden) who has repeatedly defended the tariffs as a useful tool in confronting China over its trade practices.

“The China tariffs are, in my view, a significant piece of leverage, and a trade negotiator never walks away from leverage,” Ms. Tai told a Senate subcommittee meeting on June 22.

For its part, China has long pressed the U.S. to ease the tariffs, contending they hurt both countries.

“With inflation rates running high across the globe, the U.S. needs to lift all the additional tariffs imposed on China, as this will serve the interests of businesses and consumers and benefit both countries and the world at large,” Chinese Foreign Ministry spokesman Wang Wenbin said at a June 15 press conference.

As the main weapon of his trade war with China, former President Donald Trump imposed tariffs ranging from 7.5% to 25% on Chinese imports worth roughly $370 billion over four rounds between July 2018 and September 2019. The action was based on the findings of a Section 301 investigation over China’s practices related to technology transfer and intellectual property.

While early rounds of the tariffs were placed on strategic items closely linked to the investigation, the lists were later expanded to consumer goods as Trump officials ramped up pressure on Beijing.

There is one reason why we should be skeptical that Biden will order tariff cuts: labor unions and progressive Democrats, who have had a decisive sway on Biden’s trade policy, are among the most vocal opponents of tariff cuts. Among them are the members of the Labor Advisory Committee advising the USTR, representing top unions including the AFL-CIO, United Steelworkers and Service Employees International Union.

They noted that nothing has changed in China’s practices since Trump’s 301 investigation that would merit lifting the tariffs. If anything, they wrote, Beijing has “only doubled down on their strategy and approach.”

Tyler Durden
Mon, 07/04/2022 – 15:15

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