Tariff cuts can help tame US inflation

Levies should go in order to restore trade ties with China, experts say

The United States would do well to remove additional tariffs on Chinese goods if it is keen to rein in record-high domestic inflation, experts and business leaders said on Monday.

Urging the US to cut the tariffs, they said China-US economic and trade cooperation will be strengthened with lower tariff levels that can also benefit world economic recovery.

But, it seems as though the US may stick to its overall strategy of countering China’s rise. They expect China to deepen reform and expand high-level opening-up to cope with the situation.

Their remarks came after US Commerce Secretary Gina Raimondo said on Sunday that the US President has given the order to look at the option of lifting some tariffs on certain imports from China, to combat the current high inflation.

“As the world’s two largest economies, any improvement in economic and trade relations between the US and China will be beneficial not only for themselves but also for the world,” said Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing.

Any US decision to remove tariffs on certain Chinese goods will only be made to serve its purpose of mitigating pressure on US economic growth while also continuing to suppress China through decoupling as much as possible, he said. Yet, it would be difficult for the US to seek decoupling from China, especially in areas where it has high reliance on Chinese goods and supply chains, like daily consumer products.

Currently, the US has kept in place most of the additional tariffs on more than $300 billion worth of Chinese goods. The US president said in May his administration was evaluating whether to cut the existing tariffs on imports from China.

Zhang Yansheng, chief researcher at the China Center for International Economic Exchanges, said the US will probably remove tariffs on consumer goods, because that will help it to increase economic benefits for its people instantly and curb runaway inflation, but tariffs on products that will suppress China’s technological innovations and economic upgrades may continue.

“About 60 percent of the additional tariffs were imposed to force foreign investors to relocate their manufacturing facilities and supply chains outside China. Such tariffs have caused significant burdens to foreign investors, including US enterprises,” he said.

“Protectionism and decoupling in areas are the choice of some people, but only cooperation and healthy competition will bring more benefits to both countries and the world.”

Analysts and business leaders said China’s acceleration of building a unified national market will help it to better cope with protective trade actions and weakened goods demand in certain countries.

They also stressed the importance of deepening reform and expanding opening-up.

Zhang Wei, vice-president of CRRC Electric Vehicle Co Ltd, a Zhuzhou-based manufacturing unit of electric and gas-powered hybrid vehicles of China Railway Rolling Stock Corp, said the company will seize more market share in the domestic market, which has showed soaring demand for electric buses in recent years.

It will further expand market channels in the Asia-Pacific region, thanks to the Regional Comprehensive Economic Partnership agreement, which took effect in January, he said.

The company has a busy work schedule manufacturing more than 700 electric buses this year, and some of them will be exported to South Korea, New Zealand and Israel among others.

Tu of UIBE said as China is opening wider to the rest of the world, it is expected to attract more foreign investment and talent and further enhance product quality and brand image, to make Chinese products more irreplaceable in the global supply chains.

Increasing tolerance for pilot works to encourage reforms while building the unified national market is also important for healthy and sustainable economic growth, he said.

Zhang of the CCIEE said China should step up efforts to attract talent and foreign investment and align with high-standard international rules to deepen reform.

China should also strengthen international cooperation in certain areas like science, technology, industrial and financial sectors, he said.