The Biden Administration is eager to tame inflation before the 2022 midterms. Secretary of the Treasury Janet Yellen met with Vice Premier of the People’s Republic of China Liu He — one of China’s top economic advisors — on Monday to discuss supply chain disruptions, high commodity prices, and the possibility of lifting Trump-era tariffs.
However, China Beige Book Chief Economist Derek Scissors does not think a tariff rollback will curb inflation.
“We have a narrow proposal that will probably come from the Biden Administration. It’s not going to have any effect on inflation,” Scissors told Yahoo Finance Live.
Scissors cited that the main precursors to inflation — gas, food, lodging — are not imported from China. These goods and services had the highest price hikes in May’s Consumer Price Index (CPI) report from the U.S. Bureau of Labor Statistics.
He also referenced how consumption of the goods affected under the tariff reversal is only a small percentage of total consumption in the U.S.
“They’re a small part of U.S. consumption,” Scissors explained. “U.S. consumption is 50 times that large.”
In January 2018, the Trump administration imposed tariffs on China amid the trade war. After the Phase One agreement in January 2022, tariff rates and the percent of trade subject to tariffs remained flat and steady. About 66% of Chinese exports are subject to the U.S.’s 19.3% tariff, according to the Peterson Institute for International Economics (PIIE).
Scissors also does not believe reversing Chinese tariffs will benefit farmers who produce agricultural goods, such as soybeans.
“What the farmers probably want is a better U.S./China relationship so they feel better about exports. That’s certainly what a lot of the business community wants,” Scissors added.
While the United States Department of Agriculture (USDA) reports that China accounts for 60 percent of global soybean imports, Scissors explains the U.S. also exports soybeans to China. Total soybean exports to China from the U.S. were $14.13 billion in 2021.
To control inflation, Scissors does recommend the U.S try to strengthen the dollar.
“A stronger dollar reduces the cost of all imports, and that would be a more powerful tool,” added Scissors.
Yaseen Shah is a writer at Yahoo Finance. Follow him on Twitter @yaseennshah22