US 'looking at' removing Trump-era tariffs on Chinese imports to fight inflation: Treasury Secretary Janet Yellen

Inflation hit 8.5% in the year through March 2022, the highest it has been in four decades. 

Jane Zhang | April 24, 2022, 02:35 PM

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The United States is "re-examining carefully" its trade strategy with China, and the idea of cutting Trump-era tariffs on Chinese goods is "worth considering", said U.S. Treasury Secretary Janet Yellen.

She was speaking in an interview on Bloomberg Television's "Balance of Power" after a week of meetings with the International Monetary Fund (IMF) and World Bank.

Strong economic performance expected this year

During the interview, Yellen spoke confidently about the U.S.'s economic outlook in the upcoming year, citing the IMF's recently-released World Economic Outlook which projected growth of over 3 per cent for the U.S. this year.

"Given that we're almost fully recovered from the pandemic, it's a good strong performance for the United States, and consistent with a labour market that will remain very strong.

I think, judging by the U.S. unemployment rate now and other measures of the performance of the labour market, it's been decades since we've seen such a strong job market with such excellent employment opportunities for people."

Yellen added that the Federal Reserve System is concerned about inflation and will be trying to get it under control by removing monetary policy accommodation — a policy that helps stimulate the economy by lowering interest rates.

According to Investopedia, the flip side of the coin is that if accommodative monetary policy is implemented for too long, it can lead to inflation.

Thus, in order to encourage growth while keeping inflation under control, many central banks alternate between accommodative monetary policy and tight monetary policy to varying degrees.

Inflation at a four-decade high

Reporter David Westin then referenced a study by the Peterson Institute for International Economics that estimated that removing a number of tariffs imposed by former President Donald Trump, including tariffs on Chinese imports, would reduce inflation by 1.3 percentage points.

For example, the study stated, given that the average U.S. household was found to spend US$61,334 (S$84,094.43) on goods and services in 2020, the 1.3 percentage point decrease in inflation would save the average household US$797 (S$1092.76) annually.

According to the Consumer Price Index (CPI), inflation hit 8.5 per cent for the one-year period from March 2021 to March 2022, the highest it has been in four decades.

Westin asked Yellen, in light of the fact that "inflation is here and now, and it's been coming for a while", why the government hasn't just removed the tariffs.

We'll do everything we can: Yellen

Yellen reiterated the government's desire to "do everything we can" to lower inflation.

She gave several examples of steps taken to do so, such as President Joe Biden's decision to release 1 million barrels of oil per day from strategic petroleum reserves in order to bring down oil prices and attempts to iron out supply chain issues.

Yellen then addressed the question about removing tariffs:

"We're re-examining carefully our trade strategy with respect to China and I think it's worth considering; we certainly want to do what we can to address inflation, and there would be some desirable effects. It's something we're looking at."

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Top photo via Chip Somodevilla and Qian Wenpan/Nanfang Daily/VCG via Getty Images.