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Runaway inflation brings new attention to easing China tariffs

The Biden administration is ratcheting up deliberations on removing former President Donald Trump’s tariffs on China, with the president still struggling to choose between lifting some of the duties to counter rising inflation and keeping them in place to please allies in organized labor.

The White House has held at least three meetings of senior economic officials in recent weeks as they try to decide how to handle the previous administration’s duties on $370 billion worth of Chinese goods, said three industry officials with knowledge of the conversations. The Treasury and Commerce chiefs have also had one-on-one meetings with Biden on inflation, said one official.

But President Joe Biden has still not decided what to do, the White House confirmed. Instead, he has repeatedly asked each side of the debate for more data supporting their position, stretching the debates on for weeks.

“No decision has been made,” a White House spokesperson said. “The President is discussing with his team on ensuring that tariffs are aligned with our economic and strategic priorities, such as safeguarding the interests of workers and critical industries, advancing our national security, and not unnecessarily raising costs on Americans.”

The deliberations take place as prices for gas, food and other necessities continue to rise. Last week’s release of the Consumer Price Index for May surprised economists as prices surged by 8.6 percent annually–the fastest rate in 40 years. Removing tariffs on some imports may not have a noticeable impact, but some top officials are advising Biden that it could be a messaging win for an administration that has largely placed its faith in the Federal Reserve to tackle rising prices.

In the conversations, Treasury Secretary Janet Yellen has focused more on the numbers — economic estimates on how much tariff relief could bring down inflation, said one of the industry officials. One prominent study estimates tariff relief could lower inflation by 1.3 percent.

Commerce Secretary Gina Raimondo, meanwhile, has focused her arguments on messaging — that its good politics to cut tariffs even if the actual impact on inflation is not that large.

Neither argument has pushed Biden to act yet, but a senior National Security Council official said that some change to the tariffs is likely in the coming weeks, reiterating a line that Yellen told to Congress last week. They key question, the person said, was more about which tariffs would be kept in place, increased, or lifted.

“Some of previous administration’s tariffs were not focused on heart of the problem, and did not solve it,” said the NSC official, who spoke anonymously to discuss policy deliberations. “This is not a binary lift all tariffs or don’t – it’s about what industries make sense and what don’t.”

The conversations are part of a year-old debate over how to handle Trump’s trade legacy with China, which the Biden administration has retained largely unchanged since taking office. Since last summer, the Treasury and Commerce Departments have pushed Biden to lift at least some of the tariffs, along with a host of multinational corporations. But they’ve been met with opposition from organized labor and the Office of the U.S. Trade Representative, whose leader, Katherine Tai, argues that lifting tariffs would reward Beijing and cost her leverage at the negotiating table with China.

The administration huddled the first partial week of June about the tariffs, said one of the industry officials, and then again early the next week, after which officials were asked for more analysis. They reconvened for another senior level meeting last week, where Biden reportedly indicated he is “leaning toward” lifting some of the tariffs, according to a report from Axios.

Still, both industry sources and the administration told POLITICO that no final decision has been made.

“President Biden has asked for analyses and perspectives of the range of voices in his economic team for how to proceed,” said the NSC official, “and he will make a decision as soon as he feels that he’s got the inputs he needs to do so.”

The Commerce Department and Treasury declined to comment, and USTR did not respond to a request.

If the administration does decide to cut tariffs, it is unlikely they will do away with all of the Trump era duties. Instead, they are likely to try to rebalance the tariff structure — cutting duties on consumer goods like bicycles, while retaining or even increasing tariffs on high-tech goods subsidized by the Chinese government, like semiconductors or batteries.

The NSC has pushed for such an approach since last year, and the White House was ready to roll out such a plan over the winter, before Russia’s invasion of Ukraine delayed the action. Last week, Yellen said publicly that the administration would look to “reconfigure” Trump’s tariffs, but declined to give a hard timeframe, saying to expect action in the coming weeks.

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