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**DECEMBER 17, 2021**
Kuttner on TAP
Going Soft on China Will Not Reduce Inflation
Why are some Biden advisers pushing this idea?
The Biden administration is understandably eager both to reduce
inflation and to demonstrate to the public that it is doing all that it
can. Some actions that the administration has taken are good economics
and smart politics-for instance, getting serious about the supply
chain mess; directing the FTC to look into price manipulation in the oil
industry and its futures markets; and using antitrust powers generally
to crack down on economic concentration and opportunistic price-gouging.
But here is a really bad idea that some in the administration are
pushing: cut some of the tariffs on China. For starters, these tariffs
are key leverage in a long-term Biden strategy of pushing back on
China's extralegal mercantilism that has been so harmful to U.S.
industry. Any unilateral disarmament on this front makes no sense.
Despite the tariffs, China's trade surplus with the U.S. has continued
to grow.
Secondly, the idea that cutting tariffs on Chinese imports would make
any serious dent in the current inflation is wishful economics and
foolish politics. Here are the numbers
.
The tariffs total less than $80 billion a year, in a $21 trillion
economy, and some of the costs are absorbed by U.S. companies. So even
if the administration ended all of the tariffs-which nobody is
proposing-that would be one-third of 1 percent of GDP. The actual
proposed cuts are described as "surgical," or less than one-tenth of 1
percent of GDP. This would have no real effect on inflation, and Biden
would be ridiculed if he tried to spin cutting China tariffs as
anti-inflation.
Yet his Treasury secretary, Janet Yellen, has been promoting this idea.
In a July interview
with
**The New York Times**, oblivious to Biden's larger China policy,
Yellen said flatly, "Tariffs are taxes on consumers. In some cases it
seems to me what we did hurt American consumers, and the type of deal
that the prior administration negotiated really didn't address in many
ways the fundamental problems we have with China."
Former Treasury Secretary Jack Lew, part of the old regime that so
bungled U.S. China policy, has added his voice to this claim. He told
CNBC
:
"I've thought from the beginning that the tariffs were an ineffective
way to deal with [China's] attacks on American consumers. And right
now, with inflation being an issue, rolling back tariffs would actually
reduce inflation in the United States."
It is highly improbable that Lew would have gone public without checking
with the current Treasury secretary and getting Yellen's blessing.
The Biden advisers pushing this dubious idea are doing him no favor.
~ ROBERT KUTTNER
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**Robert Kuttner's latest book is**
The Stakes: 2020 and the Survival of American Democracy
.
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