Biden Facing Inflation Crisis "Discussing Reduction of Tariffs on Chinese Imports"

Mester, Cleveland Fed President, "Support 0.75% Rate Hike If Inflation Doesn't Ease in Second Half"

President Joe Biden of the United States
[Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] Facing a decline in approval ratings due to inflation, U.S. President Joe Biden announced that he is considering lowering import tariffs on Chinese products. This indicates that President Biden may step back from his previously firm stance on countering China, which he has focused on since taking office to curb soaring prices. Within the U.S. Federal Reserve (Fed), there are also views that a "big step" (a 0.75% increase in the benchmark interest rate) cannot be ruled out.

According to Bloomberg on the 10th (local time), after delivering a speech on inflation at the White House, President Biden told reporters, "We are currently discussing lowering import tariffs," adding, "We are looking into what measures would have the most positive effect." However, President Biden also said, "No decision has been made yet."

The United States imposed tariffs on more than 2,200 Chinese products during the trade conflict with China under the Donald Trump administration in 2018. President Biden has reduced the number of products subject to tariffs but has maintained the policy of imposing tariffs. China continues to demand the complete removal of all tariffs.

As inflation in the U.S. worsens, support for the Biden administration is steadily declining. Inflation has already emerged as one of the biggest issues in the upcoming November midterm elections. One proposed solution is to reduce tariffs on Chinese imports. U.S. Treasury Secretary Janet Yellen expressed support, saying that tariff relief is worth considering, and Daleep Singh, Deputy National Security Advisor at the White House, also stated that most tariffs on Chinese imports do not help any strategic objectives.

President Biden’s speech came a day before the Labor Department’s release of the April Consumer Price Index (CPI). The U.S. CPI increase rate for April is expected to slow to 8.1% from 8.5% in March.

This would be the first decline in the U.S. CPI increase rate in eight months since August last year. The core CPI increase rate for April, excluding food and energy items, is also expected to fall to 6.0% from 6.5% in March.

The forecasted decline in the CPI increase rate has raised hopes that the inflation surge may have peaked. However, given the many variables such as the Ukraine war and oil price fluctuations, some caution that it is too early to be optimistic. In his White House speech, President Biden pointed out that the causes of high prices are the COVID-19 pandemic and Russia’s invasion of Ukraine.

Gasoline prices in the U.S. have hit a new all-time high. The American Automobile Association (AAA) announced that as of this day, the average U.S. gasoline price reached $4.37 per gallon, surpassing the previous record of $4.32 per gallon set on March 11. The current average gasoline price is 47% higher than a year ago. AAA explained that although gasoline prices had fallen in recent weeks, they rebounded due to rising crude oil prices.

Calls for the Fed to rapidly raise benchmark interest rates to control inflation continue. Loretta Mester, President of the Cleveland Federal Reserve Bank, said in an interview with Bloomberg TV that she would not rule out a 0.75 percentage point increase in the benchmark interest rate. While she prefers a 0.5 percentage point increase, she emphasized that if inflation does not ease in the second half of this year, she would support a larger rate hike.

This content was produced with the assistance of AI translation services.