Reciprocal Lowering of Some US–China Tariffs Could Help Reduce Inflation: Yellen

By Tom Ozimek
Tom Ozimek
Tom Ozimek
Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he's ever heard is from Roy Peter Clark: 'Hit your target' and 'leave the best for last.'
November 1, 2021 Updated: November 1, 2021

Treasury Secretary Janet Yellen said the United States expects China to make good on its pledge to buy more U.S. goods under a trade deal signed last year by President Donald Trump, while noting that a reciprocal rollback of some tariffs could be a “desirable outcome” that helps ease inflation.

Yellen made the remarks in an interview with Reuters, in which she was asked whether removing some tariffs on Chinese goods could alleviate some domestic price pressures in the United States, where inflation has been running at a 30-year high. The Treasury secretary answered that tariffs tend to raise prices for domestic businesses and that at least some of those costs tend to be passed on to consumers, so removing them would have a “disinflationary” effect.

At the same time, Yellen said Washington was waiting for China to execute on its commitment to buy $200 billion in additional U.S. goods and services under the Trump-era phase one trade agreement.

“Our trade representative has said that we would consider additional tariffs reductions,” she told the outlet. “We want to see China meet their commitments they made under phase one, but stabilizing and perhaps eventually lowering some tariffs in a reciprocal way could be a desirable outcome.”

Yellen also reiterated her oft-repeated view that inflationary pressures were driven by pandemic-related supply chain dislocations that would ease once supply-side issues were ironed out.

“I believe as we get beyond the pandemic, that these pressures release, and in that sense, I believe inflation is transitory, and we don’t have an economy that is in a longer-run sense overheating,” Yellen told a news conference in Dublin, Ireland.

While Chinese officials have called on U.S. officials to rescind tariffs imposed under Trump, the Biden administration hasn’t made significant moves in that direction, though it has resumed an exclusion process that could lead to the removal of some tariffs.

U.S. Trade Representative Katherine Tai said previously that Washington would start a “targeted tariff exclusion process” to exempt some Chinese imports from punitive U.S. tariffs, although she vowed to press the Chinese regime for “frank” talks in a bid to end Beijing’s unfair trade practices.

One of the ways Trump sought to address Beijing’s hostile trade policies and whittle down the U.S.–China trade deficit, of which he was deeply critical, was by negotiating a deal built around a pledge by Beijing to buy $200 billion more in U.S. goods and services over 2020 and 2021.

Epoch Times Photo
President Donald Trump and cabinet officials during the signing of phase one of a trade deal with China in the White House on Jan. 15, 2020. (Charlotte Cuthbertson/The Epoch Times)

According to the Peterson Institute for International Economics, a nonpartisan research organization that tracks the status of China’s purchases from the United States relative to its commitments, the Chinese Communist Party (CCP) is well behind on that pledge. For 2020, China’s total import shortfall was $73.2 billion, or 58 percent of the target, according to the institute, and by September 2021, Beijing was on track to end the year about 40 percent short of its buying commitment.

In recent decades, the Chinese regime has poured billions in state subsidies into targeted industries such as steel, solar, and agriculture, leading to the shuttering of U.S. factories and a “zero-sum dynamic in the world economy,” Tai said during an Oct. 4 panel discussion hosted by Washington-based think tank Center for Strategic and International Studies.

“Above all else, we must defend—to the hilt—our economic interests,” she said at the event, adding that she would be “taking all steps necessary to protect ourselves against the waves of damage inflicted over the years through unfair competition.”

Robert Atkinson, president of public policy think tank Information Technology and Innovation Foundation, said that Tai’s remarks in October fell somewhat short of expectations.

“I would have liked to see her say, ‘We’re going to give the Chinese two months on the stage one commitments, and after that, forget it. We’re not going to waste our time anymore,’” he told The Epoch Times.

The Chinese are masters of “rope-a-dope,” he said, referring to a tactic coined by legendary U.S. boxer Muhammad Ali, in which one allows an opponent to tire himself out.

“There’s a level of urgency here that has to be confronted,” said Atkinson. “The longer the Chinese would go on with this, the more relative advantage they get over us.”

Eva Fu contributed to this report.

Tom Ozimek
Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he's ever heard is from Roy Peter Clark: 'Hit your target' and 'leave the best for last.'