Expert: U.S. is damaging itself for putting tariffs on China

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Removing additional tariffs on Chinese goods will significantly ease the pressure on companies in both China and the United States, and help the world to curb inflation, experts said on Wednesday (May 4).

Their remarks followed the Office of the United States Trade Representative, or USTR, announcement on Tuesday of the commencement of the statutory four-year review of the continuation of the US "Section 301" tariffs on Chinese products.

In the four-year review, the USTR will examine the tariff actions on Chinese-origin products from July 6, 2018 to Aug 23, 2018.

Based on this review, the US government can determine whether to maintain the tariffs, change the tariff rates, or remove the tariffs.

In the first quarter of this year, China-US trade grew 12 percent year-on-year to $185.92 billion, data from China's General Administration of Customs showed.

According to Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing, the additional US tariffs on Chinese products have put heavy burdens on US companies and aggravated inflation levels in the country.

In the US, many businesses involved in trade have been seeking rollback of the additional tariffs on Chinese products.

Besides, many of the tariffs were levied through administrative orders rather than being based on relevant laws. This led to a series of complaints and lawsuits that challenged the authority of those orders issued by the former administration, he said.

In the two-step review process, the first step is for the USTR to offer an opportunity for US domestic industries that benefited from the tariffs to request their continuation. Legally, the tariffs are to terminate four years after their application, if no US party submits a request that they be continued.

If there are requests to continue, the tariffs are received, under the statute the following step requires the USTR to undertake a review of the effectiveness of the "Section 301" tariffs on achieving their objectives and their impact on the US economy and consumers.

Cancelling the additional tariffs on Chinese products will also help many parts of the world to curb inflation, because stable product and commodity supplies from China and the US – the world's two largest economies – will facilitate the world to build strong industrial and supply chains, said Zhang Yongjun, deputy chief economist with the China Center for International Economic Exchanges.

As the US dollar is a global currency, the increase in its supply, which far outpaced that of other global currencies like the euro, directly pushed up prices in the US, besides fueling inflation worldwide, which has been exacerbated by the Russia-Ukraine conflict, he noted.

Amid global inflation and growing pressures on the global supply chain, tariffs have become an inconvenient factor that inhibits enterprises from conducting international trade cooperation, said Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing.

China and the US, he said, should not only remove additional tariffs imposed during their trade disputes, but even further reduce tariffs to make them even lower than the pre-dispute levels. That will significantly boost expectations on normal global supply chain operations, bolster market confidence and facilitate global economic recovery.

"As the world's two largest economies, healthy bilateral relations between China and the US are important not only to them but the world, as the global economy has been facing a number of uncertainties in recent years," he said.

Woody Guo, president for China unit at Herbalife Nutrition, a US-based manufacturer of nutrition products, said it is beneficial for China and the US to enhance their ties in the area of trade and economic cooperation.

"In China, consumption upgrade and domestic demand expansion will help the country to grow its consumer base under the dual-circulation development paradigm, providing huge growth potential for foreign enterprises, including Herbalife Nutrition," Guo said.

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Elimination of China tariffs will be key

Easing restrictions: The US and Chinese flags outside a hotel in Beijing. American tariffs on hundreds of billions of dollars of Chinese imports are due to expire in July, but could be extended if enough industries ask for an extension. — AFP

WASHINGTON: The United States government should eliminate or at least reduce additional tariffs on Chinese imports imposed during the Trump administration, a US trade expert says, arguing that such trade liberalisation measures will help lower elevated inflation and stabilise inflation expectations.

“Here, we’re running a red hot economy. So anything you can do to reduce that cycle is good news,” Gary Hufbauer, non-resident senior fellow at the Peterson Institute for International Economics (PIIE), told Xinhua in a recent phone interview.

In a research published on PIIE’s website, Hufbauer and his colleagues Megan Hogan and Yilin Wang argued that “a feasible trade liberalisation package” could deliver a one-time reduction in consumer price index (CPI) inflation of around 1.3 percentage points. That would save US$797 (RM3,467) for every US household.

He said the direct effect of eliminating additional tariffs on Chinese products would be a 0.3 percentage point reduction in the CPI, but there would also be indirect effect, which will add “substantially” to the 0.3 percentage point.

“It would be a pretty big signal to US firms that they are going to face more competition and that might cause them to moderate their price increases as inflation rolls forward,” said the long time trade expert.

“We’re in a world now where inflation expectations are really quite high,” Hufbauer said, noting that US Federal Reserve’s (Fed) interest rate hikes would have some effect on inflation expectations, and trade liberalisation measures “would have an additional effect.”

Stabilising inflation expectations is important, he said, because when expectations are that inflation is going to continue, “that then feeds into wage demands and that then keeps the cycle going.”

According to the latest data from the US Labour Department, the CPI in March surged 8.5% from a year earlier, the largest 12-month increase since the period ending December 1981. That followed a 7.9% year-on-year gain in February.

US personal consumption expenditures price indexes, the Fed’s preferred inflation measure, soared by 6.6% in March over the past year, the Commerce Department reported on Friday.

In reaction to the argument that reducing the China tariffs would not lead to a meaningful reduction in prices, Hufbauer said it doesn’t completely eliminate the inflation problem, “but it’s better than doing nothing.”

“So there’s raising interest rates, there’s cutting back federal spending, there’s reducing tariffs, all of those things have some impact,” he said. “I would say it’s something where every little bit counts.”

Regarding the current political environment, Hufbauer said he thinks it will be difficult for the administration to reduce or eliminate additional tariffs on Chinese imports before the mid-term elections, but he hopes that it will do that.

The trade expert said he is “very encouraged” by a recent statement by Deputy National Security Adviser Daleep Singh, who said the Biden administration could lower tariffs on non-strategic Chinese goods such as bicycles or apparel to help curb inflation.Hufbauer noted that the Biden administration could be reluctant to remove the Trump-era tariffs, because it would have to face criticism for being “soft” on China.

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