With inflation at record highs and Americans struggling to afford necessities like food and clothing, Democrats should continue to weigh all options when it comes to lowering costs. For example, eliminating tariffs on low-priced home products should be a prominent solution to free up the supply chain and reduce inflation.
Many will recall former President Donald Trump’s trade war, in which the administration raised tariffs on imported goods from China in an effort to protect American jobs and businesses. Unfortunately, Trump’s protectionist policies did not protect jobs and instead forced businesses to pass the added tariff fees onto consumers in the form of higher-priced goods. To ease the growing financial burden on American families, President Biden must consider the elimination of tariffs and expanded trade with allies—something U.S. Treasury Secretary Janet Yellen recently called for to help businesses import and source products more freely, which in turn would lower the price of goods.
Current trade tensions with China provide an ideal time to begin reevaluating our trade policies with allied countries to strengthen those relationships, build more resilient supply chains, and help ease inflationary pressures. To achieve this goal, we must reduce trade barriers and pursue more open trade. Some in the Biden administration recognize this opportunity, with Deputy National Security Adviser Daleep Singh suggesting recently that the U.S. could lower tariffs on products with little strategic or technological importance, including things like bicycles and apparel.
Yellen went further, telling the Atlantic Council recently “we should also consider building a network of plurilateral trade arrangements” and announcing that her department is looking carefully at our current trade strategy with China, admitting that reductions in tariffs would ease rising prices to some extent. This combination of lowering tariffs and expanding trade with Allies is the best strategy to counter China and help Americans stretch their family budgets.
To achieve these strategic goals, the Administration should pursue three concrete steps:
- Immediately end Trump’s punitive tariffs on consumer goods, like clothing, food, toys, and shoes.
- Announce new trade liberalizing policies with allies in the Western Hemisphere, particularly for industries that create jobs in Central America like apparel, at the Summit of the Americas in Los Angeles next month.
- Seek new free trade deals with other allies, particularly those in the Asia-Pacific region, or rejoin the Trans-Pacific Partnership.
For many American families, this help could not come soon enough. Forty-five percent of U.S. households reported severe or moderate hardship due to inflation, with 7 in 10 families with a yearly income of less than $40,000 admitting to financial hardship.
Since the start of Trump’s trade war in 2019, tariffs have cost American households an average of $831 a year, and the Congressional Budget Office (CBO) estimated families paid over $1,200 in 2020 alone. Worse yet is the regressive nature of these tariffs. Low-income, single-parent, African American, and Hispanic families are hit the hardest, as they tend to buy more home necessities like clothes and shoes. Despite being a relatively small share of total imports, these products make up most of the revenue earned from tariffs.
In addition, income disparities are further realized through higher tariff rates levied against cheaper goods, as opposed to luxury items. For example, expensive leather footwear faces an 8.5 percent tariff rate while cheap sneaker imports are forced to pay a rate of 48 percent.
Trade Partnership Worldwide estimates a $75 billion boost to the economy if the U.S. and China were to both drop their competing tariffs. Given their regressive impact, this solution would have an outsize effect on the most financially vulnerable American families. If the president and his administration are serious about tackling inflation, especially for those struggling the most, eliminating tariffs and expanding trade with allies must become a top priority.
