US Must Be ‘Strategic’ on China Tariffs, Trade Chief Says

Date: Thursday, May 26, 2022
Source: Bloomberg

The US must be “strategic” when it comes to a decision on whether to remove China tariffs, Trade Representative Katherine Tai said a day after President Joe Biden mentioned he would review Trump-era levies as consumer prices surge.

“With respect to the tariffs, our approach as with everything in this relationship, is to be strategic,” Tai said on Tuesday in an interview with Bloomberg Television’s Shery Ahn and Haidi Lun. “We have to keep our eye on the ball in terms of how to effectively realign the US-China trade and economic relationship.”

Tai wouldn’t say whether the administration would remove the tariffs, or give a time frame for making a decision.

“All options are on the table in terms of how we address our short-term economic needs, but our eye must be on the ball with respect to the medium and long term needs for the United States to realign this economic and trade relationship,” she said.

Biden on Monday said he’s considering removing some of the tariffs and would talk with Treasury Secretary Janet Yellen about it after returning to the US from Asia. The offshore yuan jumped as much as 0.7% in reaction to those comments and reached the strongest level since May 5.

He added that considering high inflation rates, lifting the tariffs “is in the interests of consumers and businesses. It is in the interests of the US, China and the whole world.”

Tai earlier this month said that while relief from U.S. tariffs on China is one option under consideration to confront the fastest inflation in four decades, the duties should be studied in the context of broader economic policy. She dismissed March research from the Peterson Institute for International Economics, which estimated that eliminating a wide array of tariffs, including those on Chinese goods, could reduce inflation by 1.3 percentage points.

Her comments contrasted with Yellen, who last month suggested the U.S. is open to scaling back the widespread Trump-era tariffs on merchandise imports from China to help provide relief to Americans. While Yellen has tended to focus more on the cost that tariffs impose on American consumers, Tai has highlighted the leverage that they provide at the negotiating table.

The Biden administration earlier this month also took the first step toward a review of tariffs on more than $300 billion in Chinese imports, which is required to prevent them from automatically expire in July. Some economists, lawmakers and the US Chamber of Commerce have pressured the administration to reduce or eliminate the tariffs.

Former President Donald Trump imposed tariffs after an investigation concluded China stole intellectual property from American companies and forced them to transfer technology. China then responded with its own taxes on imports.

Biden on Monday highlighted that he himself hadn’t imposed the tariffs, but rather inherited them from his predecessor.

‘Challenging Partners’

Aides within the administration have also expressed wariness to suspend tariffs and risk appearing soft on China ahead of the November congressional elections. The Biden administration on Monday unveiled the 13-nation Indo-Pacific Economic Framework, which doesn’t include any tariff reductions, in a bid to reassert US leadership on economic issues in the region.

“What is clear to us in the Biden administration is that we need new approaches to trade,” Tai said. “We need innovation in the way we engage with our partners and our allies.”

The US is casting the net wider in Asia with the framework, but that might make a comprehensive agreement more difficult as some of the countries involved haven’t always followed through on other agreements, said Deborah Elms, Singapore-based executive director of the Asian Trade Centre.

India opted out of the Regional Comprehensive Economic Partnership after saying some of its concerns weren’t met, while Indonesia hasn’t ratified the agreement. Separately, Malaysia and Brunei have yet to sign off on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

“The record suggests that some of these 12 are challenging partners to work with in terms of delivering results,” Elms said. “A note of caution might be in order.”


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