GT Voice: China won’t be swayed by US trial balloon on tariff reduction
Published: Jun 23, 2022 09:59 PM
China US Photo: GT

China US Photo: GT

US Trade Representative Katherine Tai said at a Senate hearing on Wednesday that US tariffs imposed by the former Trump administration on Chinese goods are "a significant piece of leverage" in the US-China trade relationship and "a trade negotiator never walks away from leverage," Reuters reported on Thursday.

US leaders, including President Joe Biden and US Treasury Secretary Janet Yellen, have all spoken out on considering lowering tariffs on Chinese goods to help tame the country's most serious inflation challenge in four decades. However, the remarks made by the US Trade Representative, the most senior trade official in the US government, suggested that a real action of tariff removal may not come easily, which needs to be made in exchange for some concessions from China.

In other words, the US intends to use lowering tariffs on Chinese goods as a bargaining chip, but China won't be swayed by such acts of political blackmail.

The No.1 problem facing the US economy right now is high inflation, which has something to do with the heavy tariffs imposed on Chinese imports. Tariffs raise costs on products imported from overseas, making them more expensive for domestic businesses and households. From an economic point of view, tariff cuts are apparently the most direct and feasible means of curbing inflation, but the seemingly endless debate within the Biden administration indicates that this is more of a political policy choice than an economic policy one. Tai said on Wednesday that there's "a limit to what we can do" to ease inflation through tariff changes, which contrast with those of US Treasury Secretary Janet Yellen, who said reducing tariffs could help bring down prices.

Whether the US discussion of China tariffs is a political ploy or a trial balloon to test China, the longer the tariffs are kept in place, the more the US economy will have to suffer from high inflation. 

If the US really wants to alleviate its inflationary pressure, it needs to figure out how to reduce political interference in its trade policy and how to avoid politicizing economic and trade issues.

There is no denying that China still cares about any change in US tariff policy, but not as much as it used to do. This is because China's economy has shrugged off the impact of the US-launched trade war and has effectively coped with the challenges. Not only did China's foreign trade exceed $6 trillion in 2021, but trade with the US increased by nearly 30 percent year-on-year to $755.6 billion.

By contrast, it is the US that has swallowed the poisonous pill of its self-inflicted tariff policy. Since the tariffs came into effect, they have cost US corporations more than $1.7 trillion and increased each American household spending by $1,300 each year.

Indeed, it is the US, not China, that has the pressing need to remove the tariffs to help alleviate its domestic economic woes. The possible tariff reduction is not a gift to China, but an extremely reluctant choice US politicians would have to make. 

And given the constant US sanctions on Chinese businesses and products, it is clear that the US strategy to contain China has not changed. China has already seen through their words and acts. The current Chinese economy is busy trying to boost the post-pandemic recovery, with China having no interest in messing around with Washington

The US now needs to turn to China for help when it comes to easing inflationary pressure. But the US cannot have it both way in asking China for help while keeping China in stranglehold.

The US economy needs Chinese supplies of low-cost products to reduce its domestic inflation pressure, but global trade is no easy thing. With global prices soaring, Chinese products are also under pressure. The China-US trade is no longer determined by the US alone.