People across the United States are feeling the effects of the highest inflation in 40 years. As the additional cost of gas, groceries and rent begins to weigh on families, politicians across the country have been quick to speak up on the crisis, but they propose very little of substance that could address the problem at hand. Congress and the Biden administration can start the fight against inflation by removing an unnecessary and burdensome tax on consumers and businesses: tariffs. 

In recent weeks, President Joe Biden weighed the possibility of rolling back tariffs levied against China under the Trump administration. The policies were introduced by then-Trade Representative Robert Lighthizer and White House trade adviser Peter Navarro, both ardent supporters of economically nationalist protectionism. The Trump administration justified the tariffs as a foil against unfair Chinese trade practices, claiming they would harm Chinese producers by taxing imports, simultaneously depressing price advantage in domestic markets. Producers may feel the burn of decreased sales on the back end, but American consumers and businesses see this policy reflected in higher costs. Studies have shown that tariffs do more harm than good, leading to higher levels of unemployment and inequality. American policymakers have learned this lesson before, after the failed experiment with tariffs on Chinese steel under President George W. Bush. 

Despite the repeated failure of these protectionist trade policies, tariffs continue to emerge as a potential solution. Though tariffs were a key element of the Trump agenda, Biden has been reluctant to do away with them, regardless of calls for change from the business community and his own Treasury Secretary. The hesitation may be rooted in labor union support for tariffs. Biden’s trade chief fears that scrapping the tariffs would be a giveaway to China despite their outsized negative impact on American consumers and businesses.  

Failed attempts to use tariffs as leverage against the Chinese have resulted in more harm to the American economy than to that of China. Solutions to the growing problem of Chinese predatory economic policies must be more innovative and holistic. Potential solutions include tax reform, investing in STEM education and support for domestic innovators. Instead of devoting efforts to broader solutions, the administration is continuing to damage the domestic economy during a time of increasing financial hardship. President Biden has made it clear that he wants to combat rising costs. He can start by doing away with ineffective tariffs, providing aid to struggling families and businesses. 

Some estimates show that reducing tariffs could eventually lead to a 1 percent decrease in the Consumer Price Index (CPI). While concerns over Chinese trade practices are valid, after years of attempting to force changes through tariffs, the administration should know that they are of limited effectiveness. In the medium term, the United States needs to be more innovative in combating China’s aggressive economic misconduct. But right now, people need financial relief, and reducing tariffs is where Biden should start.

Featured Publications