To tame inflation, Biden should cut tariffs

Despite a strong economy with unemployment falling and GDP rapidly growing, and despite steady progress on his ambitious agenda, President Biden’s popularity has fallen. Inflation is at a multi-decade high, and worries about the cost of food, gas and overall inflation are likely at the center of that dissatisfaction. Americans are concerned about the rising prices of the everyday things they need.

Biden is in a tough spot with regards to inflation. It’s not a realistic option to simply ignore it or tell voters not to worry about it. Blaming it on corporate greed, as Sen. Elizabeth Warren (D-Mass.) does, is self-evidently ridiculous (Did corporate greed disappear during all the years that inflation was low?) and doesn’t do anything to address the issue.

And while there are policies that can fight inflation, those often come with serious drawbacks. Fiscal and monetary policy responses are something Biden can’t do alone — those powers lie with Congress and with an independent Federal Reserve. And even if Biden could successfully pressure Congress and the Fed into anti-inflation policy, those policies often come with the side effect of slowing economic growth, something that no president wants to do. Luckily, there is a policy change that can be made without Congress and without harming growth — reducing tariffs.

Donald Trump was an incredibly tariff-happy president, and from 2016 to 2019 the overall trade-weighted tariff rate in the U.S. increased from 1.4 percent to 2.8 percent. Worryingly, Biden has done nothing to reverse this protectionist trend. Biden hasn’t added new tariffs, but also hasn’t taken major actions to remove tariffs, and instead has kept almost all of Trump’s. This is a mistake — tariffs (primarily on China) do not protect American jobs and, in fact, cost America jobs.

Vice President Harris acknowledged this herself in her vice presidential debate with Mike Pence, saying “The Vice President earlier referred to what he thinks is an accomplishment, the President’s trade war with China. You lost it. What ended up happening is because of a so-called trade war with China, America lost 300,000 manufacturing jobs. Farmers have experienced bankruptcy because of it. We are in a manufacturing recession because of it.” Then-candidate Harris was correct, but the administration she helps lead has done little to correct this situation.

These tariffs are not just bad for economic growth and jobs. They also raise prices on everyday items for consumers, because tariffs are fundamentally a hidden sales tax. Even setting aside Trump’s new tariffs, the permanent tariff system adds 12 percent to the cost of an imported cotton pillowcase, 14 percent for a stainless steel spoon, 20 percent for a men’s cotton shirt. Tariffs are raising the prices for the everyday products Americans need. A study estimated the total cost to an average American family to be $1,000 per year.

In addition, tariffs hit poor families much harder than rich families because tariffs on luxury items are usually lower than on mass market items. A cashmere sweater has a 4 percent tariff, compared to 32 percent for acrylic. A silk pillowcase gets hit with a 4.5 percent tariff, compared to 14.9 percent for a polyester pillowcase. A drinking glass costing over $5 has a 3 percent tariff, while cheaper budget glasses get a 22.5-28.5 percent rate. Tariffs don’t just raise prices; they raise prices the most on those who can least afford it.

Biden has also kept Trump’s tariffs on key industrial inputs such as steel and aluminum, and recently even doubled tariffs on Canadian lumber. This makes no sense economically or politically. Surveys of economists show near unanimous disapproval of such tariffs. They hurt domestic industry, disrupt supply chains and raise prices on key inputs, which leads to higher overall prices for consumers. This pass-through cost is very real — anything that uses lumber, steel or aluminum is more expensive because of these tariffs. And the category of “products that use either lumber, steel, or aluminum” is enormous.

Lowering tariffs will help reduce inflation, and the Biden administration should start the process immediately. Ed Gresser of the Progressive Policy Institute, building on analysis from the San Francisco Fed, estimates that Trump’s tariffs have likely raised inflation by 0.5 points. Removing them wouldn’t kill inflation, but it would make a difference in many key areas. And unlike some anti-inflation moves such as raising interest rates or contractionary fiscal policy, lowering tariffs is a pro-growth move. A policy that can lower inflation while boosting economic growth is an obvious win/win scenario. And best of all, President Biden doesn’t need anyone’s permission to do it. He can unilaterally act to undo Trump’s tariffs without the need for congressional approval.

The American economy is in a very strong place right now, as long as we can take credible actions to reduce inflation. Lowering tariffs is an easy way to do that and will help lower prices, promote growth, and especially help working class families. Tariffs are ultimately a tax paid by the American consumer – not other countries. President Biden should act immediately and fight inflation by reducing tariffs across the board.

Jeremiah Johnson is the policy director for the Center for New Liberalism at the Progressive Policy Institute, and is a co-founder of the Neoliberal Project.