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Rolling again U.S.-China tariffs would ease inflation within the U.S., former Treasury secretary says

Eliminating tariffs imposed on items in the course of the worst of the commerce conflict would assist ease inflation within the U.S., former Treasury Secretary Jacob Lew instructed CNBC on Tuesday.

However there’s presently “no political area” to take action, he mentioned on CNBC’s “Road Indicators Asia.”

“I feel that america and China have deep variations. I’ve by no means thought it ought to simply be about negotiating the alternate of 1 good or one other on one facet or the opposite. It ought to be a few stage taking part in area,” Lew mentioned. He served as treasury secretary from 2013 to 2017 in the course of the Obama administration.

He continued: “I’ve thought from the start that the tariffs have been an ineffective method to take care of their assaults on American customers. And proper now, with inflation being a difficulty, rolling again tariffs would really scale back inflation in america.”

Relations between Washington and Beijing took a flip for the more severe in 2018, when the Trump administration imposed tariffs on billions of {dollars} price of Chinese language items and Beijing retaliated with comparable punitive measures, drawing either side right into a protracted commerce conflict.

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U.S. tariffs on Chinese language items stood at a median of 19.3% on a trade-weighted foundation in early 2021, whereas Chinese language tariffs on American merchandise have been at about 20.7%, in line with information compiled by suppose tank Peterson Institute for Worldwide Economics earlier this yr.

Earlier than the commerce conflict, U.S. tariffs on Chinese language items have been on common 3.1% in early 2018 whereas China’s tariffs on American items have been at 8%, the info confirmed.

Referring to rolling again tariffs, Lew mentioned: “Each the leaders should, I feel, create political area in our two international locations for these points to be points the place you possibly can transfer and make progress, as a result of in any other case we both keep the place we’re. It will get worse. I feel we are able to do higher.”

American companies are bearing many of the price burden from the elevated tariffs imposed on the peak of the U.S.-China commerce conflict, in line with a report from Moody’s Buyers Service earlier this yr.

The rankings company mentioned that U.S. importers absorbed greater than 90% of further prices ensuing from the 20% U.S. tariff on Chinese language items. Meaning U.S. importers pay round 18.5% extra in worth for a Chinese language product topic to that 20% tariff charge, whereas Chinese language exporters obtain 1.5% much less for a similar product, in line with the report.

‘Extra nervousness’ about inflation

However Lew instructed CNBC it is doubtless “a lot of the inflation that we’re seeing will work its means via.”

“I do not suppose anybody is predicting hyperinflation,” he mentioned. “However I feel there’s been a little bit of extra nervousness about inflation. And candidly, the general public response to inflation may be very sturdy.”

However Lew warned that policymakers should stroll a fantastic line and be sure that measures used to fight inflation do not gradual the economic system down a lot that they dampen development.

— CNBC’s Yen Nee Lee, Jeff Cox contributed to this report.

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