The study we conducted at Peterson Institute for International Economics showing that reducing tariffs would help ease inflation has struck a nerve among protectionists, illustrated by Oren Cass’s column “Cutting China tariffs will offer no respite from rising prices” (Opinion, May 2). Let us make clear what we are and are not saying.
Tariff reduction lowers prices through direct and competitive effects. The direct effect is straightforward: lower prices for imported intermediate components and for households shopping at retail outlets such as Target or Walmart. The competitive effect lowers prices for competing domestic merchandise.
Contrary to Cass’s assertion, we do not contend that today’s record inflation was triggered by Donald Trump’s trade war with China, or that reducing trade barriers is a silver bullet for ending record inflation.
Cass acknowledges that tariff reduction “might cause a one-time downward shift in prices” while not affecting other underlying drivers of inflation. What, precisely, would be so bad about that? Consumers and importers would welcome such a step. Indeed, Treasury secretary Janet Yellen and others in the Biden administration have acknowledged that tariff cuts are a tool the administration may use to fight inflation. And unlike monetary and fiscal policy — lower tariffs can be implemented by President Joe Biden on his own initiative.
We do not disagree that it would be best for tariffs to be lowered by mutual agreement with trading partners. As for China, like others in the protectionist camp, Cass believes that all Chinese imports threaten American security. He makes no distinction between shoes and furniture on the one hand and state of the art semiconductor chips on the other. In his view, those who make the distinction, and those who see the benefit of lower prices to America, are guilty of “globalisation propaganda”.
We stand guilty as charged of arguing and documenting that liberalised trade has added trillions of dollars to the global economy, lifted hundreds of millions out of poverty and been a boon to US consumers and businesses.
Gary Clyde Hufbauer
Megan Hogan
Yilin Wang
Peterson Institute for International Economics, Washington, DC, US