Insight - Curbing inflation by lifting tariffs on Chinese goods


Win-win situation:A worker at a steel mill in Hefei, east China’s Anhui province. The US economy can benefit from the cancellation of tariffs on Chinese goods, including punitive duties on Chinese steel and aluminium. — AFP

THE annual inflation rate in the United States surged to 9.1% in June, the highest since November 1981, from 8.6% in May and above market forecasts of 8.8%, according to the US Bureau of Labour Statistics.

But despite being under increasing pressure to reduce, if not altogether lift, the punitive tariffs on Chinese imports to ease the inflation, the Joe Biden administration is yet to take a final decision.

High inflation has caused a sharp increase in prices of energy, especially petrol, natural gas and fuel, food and durable goods.

And the historical high inflation can be attributed to several factors including the US Federal Reserve’s (Fed) aggressive monetary policy, which raised its balance sheet assets to about US$9 trillion (RM40.12 trillion) from about US$4 trillion (RM17.83 trillion) in early 2020.

Unfortunately, the annual growth rate of the consumer price index, a key measure of inflation, in the United States may remain between 7% and 8% this year.

The impacts of the Covid-19 pandemic on the global supply chains, too, contributed to the high inflation in the United States.

Domestic supplies of goods and services in developed economies such as the United States and the European Union have fallen short of meeting the demands for quick recovery, with congestion at ports and inefficiency of the supply chains, combined with high tariffs, aggravating the supply shortage.




While the Russia-Ukraine conflict has driven up global energy prices, dealing a blow to the country on wheels that is the United States, which has suffered from the rising consumer price index (CPI), severe labour shortage has forced companies to raise employees’ salaries to recruit and/or retain workers, pushing the US economy into an inflation-salary hike spiral.

This has raised concerns that the US economy could soon enter into recession.

Will these factors prompt the United States to lift the tariffs on Chinese goods to curb inflation?

Indeed, the Biden administration is making efforts to bring inflation down, particularly before the midterm elections in November.

The US administration has adjusted monetary policy, and the Fed has raised the interest rate to 1.5% to 1.75% and it could further increase it all the way up to 3% to 3.5% this year.

No doubt, the United States needs to take emergency measures to help deal with the disruption in global supply, reduce tariffs on Chinese products and enhance global cooperation.

But amid all these developments, the International Monetary Fund (IMF) slashed the United States’ growth forecast for 2022 to 2.3% on July 12 from 3.7% in April and 2.9% in June.

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