Lifting China tariffs helps U.S. lower rampant inflation: think tank
A stall in Grand Central Market in downtown Los Angeles, California, U.S., March 11, 2022. /CFP

A stall in Grand Central Market in downtown Los Angeles, California, U.S., March 11, 2022. /CFP

Lifting or reducing additional tariffs on Chinese imports imposed during the Trump administration will help lower elevated inflation and stabilize inflation expectations, an expert argued in an interview with Xinhua. 

The U.S. trade office on Tuesday said it had begun a statutory process that could ultimately end up removing tariffs on Chinese goods, after Trade Representative Katherine Tai saying all tools are on the table to address rising inflation, including reductions of tariffs on Chinese imports, on Monday. 

"Here, we're running a red hot economy ... So anything you can do to reduce that cycle is good news," Gary Hufbauer, nonresident senior fellow at the Peterson Institute for International Economics (PIIE), told Xinhua.

March: U.S. inflation reaches 8.5%, hitting four-decade high

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

He said the direct effect of eliminating additional tariffs on Chinese products would be a 0.3 percentage point reduction in 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 U.S. 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 U.S. Federal Reserve's interest rate hikes would have some effect on inflation expectations, and trade liberalization measures "would have an additional effect."

Stabilizing 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."

(With input from Xinhua)

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