China has some advice for the US on inflation: Remove tariffs

China is hoping for the U.S. to remove punitive tariffs on its goods, with a commerce ministry researcher arguing it’s in America’s best interest to do so as worries over inflation mount.

The two countries should scrap or reduce the tariffs imposed on each other under the Trump administration to help push forward future trade talks, said Mei Xinyu, a researcher at China’s Ministry of Commerce. It’ll also curb U.S. inflation pressures at a time when prices are rising faster than expected.

“That’ll be a rational choice,” Mei, who works at the ministry’s Chinese Academy of International Trade and Economic Cooperation, said in an interview in Beijing. “By cutting tariffs, it can not only help the U.S. ease their inflation pressure, but can also benefit U.S. consumers.”

With China the top exporter to the U.S., lower tariffs would mean reduced inflation imported from China, Mei said, allowing policy makers there to keep monetary policy loose to support that economy’s recovery.

However, easier monetary and fiscal policies will inevitably result in faster growth in imports from China, Mei added, which could worsen the trade imbalance between the two countries. The widening U.S. trade deficit with China was one of former president Donald Trump’s main arguments for imposing tariffs at the time.

“A loose monetary policy and a more balanced trade with China can’t be achieved at the same time,” Mei said in the interview Tuesday.

Trade Talks

The two countries are slowly resuming official contact under the Biden administration, with China’s Vice Premier Liu He holding separate calls with U.S. Trade Representative Katherine Tai and Treasury Secretary Janet Yellen in recent weeks. However, the signals from the two sides differ, with China saying the meetings showed normal communications have started and the two countries are pushing forward trade and investment ties, while Tai said recently there’s still “significant imbalance” in the trade relationship.

Mei pointed to the U.S. domestic political environment as another hindrance to future trade talks.

For trading partners that are considering negotiating with America, “U.S. society seems very divided,” Mei said. “If the deal proposed can’t be passed within the U.S., then is it still meaningful for America’s trading partners to talk to the U.S.?”

The phase one trade deal signed between both countries in January 2020 left in place higher tariffs on hundreds of billions of dollars worth of U.S. imports from China, and also on some U.S. exports to China. So far, Beijing has made only incremental progress in meeting the targets under the agreement.

Mei said China’s failure to keep up with the scheduled pace of its purchases is partly because the U.S. can’t produce and ship goods fast enough.

“We should respect objective economic laws when making any negotiations or deal,” he said.