Biden considers easing tariffs on China to fight inflation

Yahoo Finance Live anchors discuss reports that President Biden is considering the easing of tariffs on Chinese imports to help combat inflation.

Video transcript

- Janet Yellen and Chinese Vice Premier Liu He discussed hot button issues in a new chat, including international trade and supply chains, this, as President Joe Biden weighs lifting some Trump era tariffs on Chinese imports to combat inflation. Yahoo Finance Columnist Rick Newman is here with more. Rick, if the president were to lift these tariffs, how would that change the inflation outlook?

RICK NEWMAN: This all comes from a Peterson Institute bit of research earlier this year that found if Biden were to undo those Trump era tariffs, it could save the typical family about $800 a year once the effects rippled throughout the supply chain. It would bring down prices by a bit, and it might reduce the inflation rate by 1% or one percentage point or a little bit more.

This would be kind of camouflaged inside the way companies price their products. So you wouldn't see these automatic price drops. But I think more importantly for Biden, it would give him the opportunity to say, look, I'm actually doing something, because there's just precious little Biden can do.

And he has two problems. The first problem is the fact that inflation itself is too high at 8.6%. But the second problem is, he doesn't appear to be doing anything about it. He seems ineffective on this. And I think Biden is really casting around for something that just makes it look like he's taking action. And that does matter, especially in an election year, like we're in.

- And Rick, what, if anything, do we have to kind of hang our hat on whether or not the Chinese officials will make sure that some of these tariffs actually stay off for an extended period of time? Is this something that is just an intermediate solution? Or is this a longer term solution that both sides are looking for?

RICK NEWMAN: That's for Biden to decide. And this is unilateral. I mean, it's the United States that imposed these tariffs. This was not a negotiation with China. Trump just imposed these tariffs as part of his carrot and stick approach back in 2018 and 2019.

And then there was some negotiation that came after that, which involved China supposedly buying an increased amount of US exports. And they have not met those targets. And it's not clear they ever will meet those targets or they ever knew they would be able to meet those targets.

So Biden has to figure out, is this going to open him up to allegations that he's soft on China? That's important, because both parties now have gotten around to taking a hard line on China. Labor unions here in the United States also favor these tariffs, because they are a form of protectionism that makes products more expensive and then gives a little bit of an edge to homegrown labor. So Biden's got a lot to figure out here.

I guess I could throw in one other thing. If he did undo some of these tariffs, would it be temporary, or would it be permanent? My guess is it would be temporary. And I wouldn't be surprised if he does it. It would say go until the end of the year, because guess what? After that, the midterm elections will be over. Maybe inflation will be down a little bit. And that would be a point at which Biden might say, enough, the tariffs are going back into effect.