Biden Weighs Tariff Rollback to Ease Inflation, Even a Little Bit

Senior administration officials said that President Biden was considering whether to roll back some of the tariffs that Trump imposed on China.

Business groups and some outside economists say it would be a significant step for the president to immediately cut costs for consumers if he relaxed a portion of the taxes on imports.

The inflation rate hit 8.6 percent in May, but any action by the administration to lift the tariffs is not likely to make a big difference. An influential study this year predicted that a move to lift tariffs could save households $797 a year, but administration officials say there is no chance Mr. Biden will roll back all of the federal government's tariffs.

The economy is in a state of disrepair. As the Federal Reserve moves quickly to raise interest rates, stock markets have fallen into a bear market and consumer confidence has plummeted.

The overall inflation rate would be reduced by a quarter of a percentage point, according to some administration economists. In a sign of how serious the inflation problem is, officials are considering at least a partial relaxation, in part because the president has few other options.

The China tariffs are raising the price of goods in the US by adding a tax on top of what they already pay for imported goods. If companies stopped raising prices on certain products, the tariffs would be removed.

The Federal Reserve is trying to cool demand by making money more expensive to borrow. The Fed is expected to raise interest rates on Wednesday as it tries to keep inflation in check. Wall Street entered bear market territory on Monday and was steady on Tuesday.

Significant trade-offs can be carried by any move to modify the tariffs. It could encourage companies to keep their supply chains in China. It could expose Mr. Biden and his Democratic allies in Congress to accusations that he is letting Beijing off the hook when America's economic relationship with China has become openly hostile.

The U.S.-China trade deal that Mr. Trump negotiated did not include purchases of natural gas or Boeing airplanes. The United States imposed tariffs on most of the products it imports from China in order to force China to change its economic practices. More than two years later, the United States still has a 25 percent tariffs on Chinese products and a 7.5 percent tax on consumer goods.

Mr. Biden has acknowledged that China poses a threat to the US.

Business groups and economists want the White House to repeal as many tariffs as possible in order to help consumers deal with rising prices.

The March study on the issue from economists at the Peterson Institute for International Economics, who argued that a "feasible package" of tariffs removal, which includes repeal of a range of levies and trade programs, not just those applied to China, could cause a one, has been cited by Mr.

Reducing tariffs is the most potent micro economic or structural action the administration can take to reduce prices and inflationary pressure.

Even those in the administration who are in favor of easing the tariffs are skeptical that the move will give them enough relief.

Janet L. Yellen, the Treasury secretary and an advocate of some tariffs, told a House committee last week that she thinks some reductions may be justified. I don't think tariffs are a panacea for inflation

The National Retail Federation, which has long argued against the tariffs, recently made the case that eliminating them would ease inflation.

The question is whether companies that are given relief will pass the savings on in the form of lower prices or absorb them as profit. Corporations have said in earnings calls that they can charge more because consumers are paying more for everyday items.

David French, senior vice president of government relations at the National Retail Federation, said the administration had been trying to understand how quickly tariffs would translate into pricing changes, and sought assurances from retailers that any savings would be passed onto American consumers.

He thinks there will be a price reduction and money will come off the price tag. I don't think you're going to see a big change like that.

Stores may decide to hold off on increasing prices even more. Retailers will do as much as they can to demonstrate dramatic changes in pricing, but they still face pressure in the supply chain.

Mr. Biden has seen his approval ratings go down due to rising prices. The consumer price index grew at its fastest rate in 40 years in May. Mr. Biden says he wants to fight inflation.

The Commerce Department was going to investigate illegal trade practices by Chinese manufacturers when Mr. Biden announced a two-year pause on tariffs on solar panels.

Representative Tim Ryan of Ohio, who is locked in a competitive Senate race, has pushed Mr. Biden to keep the tariffs. Mr. Ryan urged Mr. Biden not to yield to Beijing's demands.

The economists don't agree on how much inflation relief the administration can get.

Part of that is because the inflation calculations cited by Mr. Summers and others include a far broader relaxation of policies than what Mr. Biden is actually considering, including popular "Buy America" programs that require the federal government and certain contractors to buy American-made goods, even if they are more

The United States trade representative said in an interview that the study by the Peterson Institute did not capture the real pain Americans are feeling.

The president of the National Council of Textile Organizations said that the tariffs were "pennies on the dollar" for Chinese goods that were already priced far below other countries.

The final retail price at a store is not the price of the good that comes in at the border. The import price for a pair of jeans from China was $4.28 in the first two months of the year, meaning the 7.5 percent tariffs added just 32 cents to the consumer's cost. She said that the bulk of sticker shock was caused by the retail price of jeans.

Advisers to Mr. Biden have differing opinions on the issue. Ms. Tai; Jake Sullivan, the national security adviser; Tom Vilsack, the secretary of agriculture; and others argue that dropping the levies is unwarranted when Beijing has failed to meet commitments in the trade deal.

People familiar with the discussions said that the officials argued in favor of reducing the levies on certain household goods that they said had little strategic importance.

At last week's House Ways and Means Committee hearing, Ms. Yellen said that the Biden administration was looking at the tariffs and that they could be rolled out in the coming weeks.

The White House spokesman wouldn't say how much of a reduction in inflation the administration believes can be achieved from a tariffs reduction. A senior administration official said that the White House had been examining several models of how lifting tariffs affect inflation, which had produced a range of estimates, depending on factors such as whether the tariffs were eliminated through an exclusion process or in one fell swoop, and whether China responded by lifting its own tariffs

Bradsher was in Boston