To combat spiraling inflation, the US is considering lowering tariffs and using other instruments.

To combat spiraling inflation, the US is considering lowering tariffs and using other instruments.

Tai pointed out that rising prices in the United States are a “shocking challenge” and whatever tools are deployed to solve it must take into account medium-term goals and not short-term ones. The United States is experiencing the highest rate of inflation in over four decades. The latest Personal Consumption Expenditure (PCE) Index, a US inflation indicator closely followed by the Federal Reserve, grew 6.6 per cent in the year to March, keeping to its fastest expansion in four decades with energy increasing by nearly 35 per cent and food by 10 per cent.

US Trade Representative Katherine Tai said during a Milken Institute event that the Biden administration is exploring cutting existing trade duties, along with all other available options, to combat the country’s soaring inflation. “We need to take a hard look at all of our economic policy options. Do you wish to take a look at the tariffs? Sure, let’s look at tariffs, but let’s also consider monetary and fiscal policy. Let’s have a look at the tax system. You must examine all of these tools “When asked if lowering tariffs may help to control inflation, Tai responded on Monday that it could. “Every tool is on the table.”

Tai’s office is required to begin notifying companies by this weekend of the impending termination of Trump-era Section 301 tariffs that were imposed on an initial USD 34 billion in Chinese goods in 2018, according to Politico citing a 1974 statute. Last week, the White House said it is continuing to look at the tariffs on China introduced by the Trump administration. The Biden administration is looking at how the tariffs impact jobs, wages, and inflation, Press Secretary Jen Psaki told reporters.

In 2018, the US hiked duties on certain Chinese imports in a bid to balance the trade deficit. Both countries exchanged several rounds of reciprocal tariffs the following year. In January 2020, the Trump administration and the Chinese government made a two-year trade deal known as “Phase One,” under which the US retained 25 per cent duties on Chinese goods worth about USD 250 billion per year, and 7.5 per cent duties on goods worth USD 120 billion, while China committed to purchasing USD 75 billion worth of US industrial goods, USD 50 billion worth of energy, USD 40 billion worth of agricultural products and up to USD 40 billion in services.

In December 2021, China said it made efforts to fulfil the deal despite the pandemic and expressed the hope that the US would also make efforts on its end to continue developing bilateral trade.

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