US President Joe Biden had yet put on the slippers of Donald Trump, his predecessor in the White House. The trade war against China, instigated by the latter from 2018, materialized by the surcharge of the equivalent of more than 300 billion euros of products made in chinahas been extended since its inauguration in 2021.
But this rare consensus between Democrats and Republicans is being shaken today by inflation, which in May reached 8.6% on an annual basis. To stem it, Joe Biden and his troops are going all out.
Ongoing Discussions
US Treasury Secretary Janet Yellen and Chinese Vice Premier Liu He discussed the possibility of lifting certain customs surcharges on Tuesday July 5. One of the trade sanctions packages, adopted in 2018 for a four-year period, is due to end on July 6. Two others will expire by September: in total, the equivalent of 240 billion euros of Chinese exports are concerned.
To renew or not to renew? The possibility of ending certain surtaxes to temper inflation was first raised publicly by Joe Biden in early May. Difficult arbitration: the rise in prices, at their highest for forty years, is at the top of the list of concerns across the Atlantic, as is the rivalry with China. And in November, the mid-term elections will be held…
America divided
Democrats are divided. In favor of the suspension of taxes, Janet Yellen estimated at the beginning of June that her administration must “rearrange” the surcharges decided under Trump, considering that some “were not really designed to serve our strategic interests”.
Those affecting semiconductors or other strategic components, in particular targeted by the sanctions package which expires this Wednesday, July 6, should be renewed.
On the other hand, those on consumer goods, such as textiles, could end. To date, according to calculations by the Peterson Institute for International Economics, an American economic think tank, 66% of products Made in China who arrive on American soil are surcharged, on average at 19.1%.
Within the Democratic camp, Trade Representative Katherine Tai regularly criticizes the possible suspension of customs surcharges, which she considers a “significant lever” in trade negotiations with the rival power.
A questioned impact
As for the main industrial union, Alliance for American Manufacturing, it published an article in mid-June with the unequivocal title: “Ten reasons why President Biden should not lift taxes on Chinese imports”citing in particular the effect “incentive” of the latter which push local companies to limit their dependence on Chinese subcontractors.
On the side of economists, the measure does not achieve consensus. At the start of the year, an article by the Peterson Institute put the impact into perspective: its direct effect on inflation would be only a quarter of a percentage point. In question ? “Chinese imports only account for 2% of the goods included (to the extent of inflation). » In any event, there is no guarantee that companies will pass this cost reduction on to prices. However, the impact could affect the trend and limit their inflation expectations.
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