Easing Tariffs | From Joe Biden, To China, without love

Some say easing tariffs on China for inflationary concerns would be missing the woods for the trees. (Source: AFP)

At this year’s correspondent’s dinner, South African comedian Trevor Noah quipped that United States President Joe Biden’s critics had unnecessarily excoriated the President. He said things were finally looking up, such as “rent is up, food is up, and gas is up”, cheekily taking a dig at the President on inflation.

My father always jested that inflation always beats interest, and now that’s the theme in Washington, as the US Federal Reserve raised short term rates by 0.75 percentage point.

Earlier this week, US Fed Chairman Jerome Powell stated that the goal was to avoid a recession through this calculated interest rate hikes have been the US Fed's biggest in a single meeting since 1994.

In an earlier article, I’d mentioned, “not since Franklin Delano Roosevelt (FDR), who took the reins in the midst of the Great Depression, has an American President entered the hallowed walls under such trying circumstances of an economic quandary and healthcare morass”.

Biden’s priorities were always going to be a complicated cocktail of two conundrums. The domestic focus would be theCOVID-19 induced healthcare crisis and rolling out the vaccine for millions in the US, a supply chain recovery, and the subsequent economic downtown.

On the international front, restoring US’ outreach to transatlantic partners, re-prioritising NATO in the wake of Russian aggression, and re-prioritising trade and multilateralism through initiatives such as the Indo-Pacific Economic Front, the Indo-Pacific Quad, the Middle East Quad, the JCPOA with Iran, re-visiting the Paris climate deal, and re-joining the World Health Organization — the last three of which, Biden’s predecessor Donald Trump walked away from.

On China, in an earlier article I’d noted that Biden would follow a policy of ‘small yard, high fence’. This essentially described that Biden would not embrace Trump’s bellicosity of starting trade wars, and that there would be room for economic engagement, but with severe caveats of security vis-à-vis Chinese companies such as ByteDance and Huawei.

Biden now faces pressure to tame inflation, as news of an impending recession dominates headlines. The continuing pandemic variants, coupled with supply chain disruption and soaring gas (fuel) prices in the wake of Russia’s invasion of Ukraine has hit US households.

It’s political music to the more fiscally conservative GOP, as Republican lawmakers look to drive the wedge deeper, as both Democrats and Republicans go to the polls ahead of the November mid-term race.

An escalating trade war between Beijing and Washington during the Trump administration affected global sentiment, including trade dependent economic hubs such as Singapore, caught between two-warring economic elephants, and dependent on both.

Biden says he is considering easing previously imposed tariffs on Chinese goods, which is a move that could ease economic tensions between the two largest economies.

He said what his former boss would often say, that ‘all options are on the table’ as the administration reviews potential changes with regards to US duties on Chinese imports, including tariff relief and new trade investigations. This comes with caveats of reviewing China’s previous issues with fair-trade practices, and precluding economic coercion, particularly in the Indo-Pacific, an area sacrosanct to Washington with the focus on IPEF and the Quad.

The focus isn’t a complete reset of economic ties between Washington and Beijing, but heavily geared towards taming a beast called inflation, and easing the stranglehold on rising consumer prices.

Easing the Trump era tariffs of up to 25 percent on hundreds of billions of dollars on Chinese imports will be welcome news for trade associations, which say, has affected the bottom-line for several US.

Within the administration are two competing viewpoints. Former US Fed Chairperson and current Treasury Secretary Janet Yellen has espoused easing tariff controls in order to aggravate the pain of rising prices at home. Meanwhile, trade tsar US Trade Representative (USTR) Katherine Tai, for whom trade comes under her office’s purview, is currently reluctant, citing the need for a more comprehensive China strategy on trade before any knee-jerk reaction.

For both Tai and Yellen, the focus is US jobs, however, for the USTR, China's trade practices are a major cause of concern. The Yellen camp believes that some of the tariffs are unnecessary and incidentally hurt the US consumer, and eradicating them would be the best way to curb inflation. The USTR’s office believes in lieu of a more focused China strategy, Beijing will continue to manipulate the market with unfair trade practices and devaluing the Yuan to gain the upper hand in the trade arena.

Tariffs on China were initially imposed for fear of patent infringements via technology transfers and intellectual property violations. The trepidation for the Tai camp and trade watchers, is that those will persist if Beijing is given a longer leash. On the other hand, removal of barriers for other goods such as t-shirts, bicycles, toys, (which China is the largest exporter of), will help the consumer in the US.

Some say easing tariffs on China for inflationary concerns would be missing the woods for the trees. Similar to Biden’s outreach to Venezuela and Saudi Arabia for additional energy resources in the market, both with egregious human rights violations, in order to economically isolate Russia.

For Biden, it’s a damned if you do, damned if you don’t. The 79-year-old US President fights a low approval rating, as Biden’s party heads to the midterms. Rising costs will be the main item for voters, while China hawks and the Republicans will accuse the President of going too soft on Beijing, that is, if there will be any allowance on this front.

Akshobh Giridharadas is a Washington DC-based former journalist. 

Views are personal and do not represent the stand of this publication.