President Biden is facing a tough decision on whether to lift some Trump-era tariffs on China, a move that economists say will help inflation but promises to anger labor unions.
Biden said over the weekend that he was still weighing such a move, and officials have not offered a timeline on when he would make a decision.
Some economists see a clear benefit to lifting some tariffs, which former President Trump imposed as part of a tit-for-tat trade war with China.
Treasury Secretary Janet Yellen told ABC’s “This Week” on Sunday that some of the tariffs inherited by the Biden administration serve “no strategic purpose.”
But the decision won’t come easily for Biden given the blowback he is risking from unions, which have publicly expressed their opposition to lifting tariffs.
AFL-CIO President Liz Shuler, who Biden shared a stage with last week when he addressed the group’s convention in Philadelphia, told CNN on Wednesday that “it’s the wrong time to relax tariffs on China.”
“We think it would have a marginal impact, at best, on inflation,” she added.
Biden has been ramping up his engagements with organized labor as Democrats worry about losing ground with blue-collar workers in the midterm elections. Democrats lost union workers in 2020 in states like Ohio to Trump, whose anti-free trade message resonated with the labor vote.
Biden routinely praises Big Labor, saying that unions “brung me to the dance” in expressing his gratitude for union support during his political career. And, for the most part, labor’s bosses are largely in his corner, which is on display when they praise the president during his visits to their events.
But labor unions would clash with Biden if he decided to lift tariffs on China amid efforts to lean into their support. Labor unions filed an official comment to the Office of the U.S. Trade Representative earlier this month to push for tariffs to remain in place.
United Steelworkers President Thomas Conway, on behalf of the Labor Advisory Committee for Trade Negotiations and Trade Policy, wrote in a letter that “members of the LAC are united in the view that the overall level and the individually identified tariffs imposed on China pursuant to the 301 actions should be extended.”
Trump imposed a raft of tariffs on China to punish Beijing for unfair trade practices that affected a wide variety of imports totaling about $350 billion.
The Biden administration has broadly maintained Trump-era tariffs and last fall launched negotiations with China aimed at enforcing the “phase one” trade agreement between Washington and Beijing brokered by the Trump administration. China fell short on its purchasing commitments under that deal.
At the same time, Biden administration officials have described the previous administration’s approach to trade with China as flawed and signaled the possibility for change.
Experts say that lifting some Trump-era tariffs would help lower the cost of goods at a time when Americans are grappling with sky-high inflation, but that depends on companies passing on savings to consumers.
Biden has limited tools with which to fight inflation, and lifting tariffs on goods from China is among a few actions under consideration at the White House as it looks to ease the burden of costs on families.
“We’re looking closely at it, and I anticipate the president will have more to say on that issue in the coming weeks,” White House National Economic Council Director Brian Deese said on CBS’s “Face the Nation” on Sunday.
U.S. Trade Representative Katherine Tai is slated to appear before the Senate Appropriations Committee on Wednesday to testify on the fiscal 2023 funding request and could field questions about the policy decision process.
“My recommendation would be to remove the maximum amount of tariffs possible on China,” said Jason Furman, who served as chairman of the Council of Economic Advisers under former President Obama.
Furman estimated that consumers would feel the relief “probably within a few months,” depending how quickly retailers adjust prices after receiving relief from tariffs. He also argued that the Biden administration should be reviewing other tariffs, not just those on Chinese imports.
“They should be pulling every lever they have,” Furman said.
Larry Summers, who served as Treasury secretary under the Clinton administration, also endorsed the idea during an appearance on NBC’s “Meet the Press” over the weekend. Biden subsequently said that he spoke to Summers on Monday morning.
“Look, I think cutting the tariffs is clearly a good idea. It will hold down prices. It will enable us to take a more strategic approach to dealing with China,” Summers said Sunday, predicting that it could cut 1 percentage point or more from the consumer price index — a key inflation gauge — over time.
An analysis produced by the Peterson Institute for International Economics earlier this year estimated that a package of tariff reductions including those targeting Chinese goods would amount to a reduction in the consumer price index of 1.3 percentage points and would save each household $797.
Lifting the tariffs would also ease tensions with business groups, which have been lobbying the administration to repeal tariffs on goods from China. An end to the tariffs would boost the bottom line for some major retailers, manufacturers and tech giants that pay tariffs of up to 25 percent to import some Chinese goods.
The National Retail Federation, which represents major retailers like Walmart and Target, launched an ad campaign this month to push for an end to the tariffs, arguing the tariffs have cost the average American family more than $1,200 a year since they were implemented in 2018.
“While the Federal Reserve continues with its long-term strategy to stem inflation, we need the administration and Congress to move forward on steps to lower prices that can be taken immediately,” National Retail Federation CEO Matthew Shay said in a statement. “Repealing tariffs is one of those steps and one of the most effective and meaningful.”