Rumors continue to mount of a rollback of US tariffs that the Trump Administration imposed on Chinese products in 2018-19. These actions are being considered by the Biden Administration with the idea of reducing US inflationary pressures, not to correct the serious policy blunder of seeking a bilateral fix for a massive US multilateral trade deficit. The impact of reduced tariffs on US inflation is likely to be minimal—at most, a one-off 0.5 percentage point reduction in an 8%+ year-over-year CPI inflation rate. Nor would tariff rollbacks have any effect on reducing the overall US trade deficit, which remains largely an outgrowth of a profound shortfall in domestic saving. The possible actions currently under consideration are thinly veiled political theater, at best.
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