KURE - Tariff talk: White House seeks to ease inflation while keeping leverage on China

Chinese tariff relief appears to be back on the table at the White House as the Biden administration continues to confront red-hot inflation readings. At a basic level, some economists have found that Chinese exporters generally didn't lower prices to keep their goods competitive, meaning U.S. importers passed the duties on to American consumers. Others say the move would not target inflation at its core (tariffs have been around since 2018) and would do little while rewarding an authoritarian government.

Snapshot: Reports suggest that a tariff rollback could come this week, though a decision isn't final and any announcement could be postponed. Possible steps include lowering duties on several categories of consumer goods, ranging from clothing to school supplies. A broad framework to allow importers to request tariff waivers could also be launched, as well as a fresh probe under Section 301 of the Trade Act focused on China's industrial subsidies.

Any easing would coincide with the end of a comment period for businesses that have benefited from the levies. The U.S. Trade Representative, which is conducting a mandatory four-year review of the Trump-era tariffs, collected industry feedback on the first batch of Chinese industrial imports valued at $34B from May 7 until July 5, while a second round covering $16B in imports will be compiled from June 24 to August 22. "The first step in the process is notifying representatives of domestic industries which benefit from the trade actions, as modified, of the possible termination of the actions, and of the opportunity for these representatives to request continuation of the actions," according to a notice in the Federal Register.

Thought bubble: The administration has been divided over the matter, with Treasury Secretary Janet Yellen calling for the reduction of "unnecessary burdens," and the USTR's Katherine Tai and NSA's Jake Sullivan viewing tariffs as economic leverage to get concessions out of Beijing. "From the domestic political perspective, there are two very strong, competing concerns. One is the need to be perceived as fighting inflation. And the other is the need to be seen to be very strong in standing up to China," explained Claire Reade, former Chief Counsel for China Trade Enforcement. "The question is how do you take all of these divergent concerns and harmonize them into one policy?"

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