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Wednesday, October 5, 2022

Reduced tariffs on imported goods from China could lower inflation – Yellen

President Trump’s 2018 tariff cuts on imported goods from China, through renewed elimination, could help reduce inflationary pressures on the economy, Treasury Secretary Janet Yellen said Thursday at Reuters Next.

“This is a process by which tariffs can be reduced. And I think it might be helpful, ”Yellen said of the tariff elimination process. “Again, this does not change the rules of the game. But this is what we are doing to relieve this pressure. ” This process provides the public with an opportunity to speak out for or against reinstating the 549 exemptions (pdf) that were previously granted, most of which expired in December 2020. The comments section closed on December 1st.

Yellen said of Trump-era tariffs that “some of them create problems with no real strategic rationale.” Tariffs on 25% of the billions of imported Chinese goods “are really driving up prices in the United States.”

Former Treasury Secretary Jacob Liu said the removal of duties on Chinese goods could reduce price increases. “I thought from the start that tariffs were an ineffective way to deal with their attacks on American consumers. And right now, when inflation is an issue, tariff cuts will actually bring inflation down in the United States, ”he told CNBC on Tuesday.

Last month, on the eve of Biden’s virtual summit with Xi, about two dozen business groups called on the US president to work to eliminate trade tariffs. They said that higher production costs are passed on to customers and contribute to inflation.

“These costs, compounded by other inflationary factors, are placing a heavy burden on American businesses, farmers and families as they struggle to recover from the effects of the pandemic,” said a letter signed by the US Chamber of Commerce and the US-China Business Council. American Soybean Association and other well-known trade groups.

The letter also referred to “respect for the rule of law and human rights” and that organizations agree that “forced labor and other human rights abuses should not take place in supply chains,” some of the issues covered by tariffs.

According to the Peterson Institute for International Economics, U.S. tariffs on Chinese goods averaged 19.3 percent in 2021, while China’s reciprocal tariff rate averaged about 20.7 percent. Before the trade war, China’s tariffs were more than double that of the United States, at eight percent, compared with 3.1 percent in the United States.

Meanwhile, tariffs have had a huge impact on the Chinese economy. During 2018 and 2019, 1,800 US-funded subsidiaries closed their operations in China, as well as several overseas subsidiaries, including those from South Korea and Germany.

Tariffs were viewed by many US presidents as a tool to protect national interests, but were condemned by international organizations such as the World Trade Organization (WTO). Since China joined the WTO in 2001, nearly 60,000 factories in the United States have closed and nearly 4 million jobs have been lost.

According to the first phase of the trade agreement signed under Trump, China is to acquire $ 200 billion worth of additional goods and services during 2020 and 2021. However, China has met only about 58 percent of this requirement by 2020 and 69 percent by August. …

Yellen said the elimination process is one of several steps taken by the Biden administration to reduce inflation in the country. The minister added that she is working with her Chinese counterpart, Vice Premier Liu He, to resolve a number of economic problems.

China “can make a big contribution to alleviating global imbalances. These are all the topics that we discussed and I expect these dialogues to continue. “

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