Former U.S. trade negotiator expects a ‘modest’ rollback of China

On Jul 6, 2022

President Joe Biden could decide “pretty soon” on a modest relief package to roll back some U.S. tariffs imposed on China in an effort to tamp down inflation, said Clete Willems, who previously served as deputy director at the National Economic Council.

“What we are expecting that the president is deciding on is a relatively modest list of potential tariff suspensions in order to fight inflation. Some of the reports indicate that it’s on the order of magnitude of about $10 billion out of over $360 billion that are currently being imposed on China,” Willems, currently a partner at Akin Group, told CNBC’s “Squawk Box Asia” on Wednesday.

Willems, who was a top White House trade negotiator during the Trump administration, noted the move is likely to come together with other actions “that are perceived as tough on China” like a “potential new investigation into China’s industrial subsidies.”

“That’s really important for the Biden administration to manage things at home, so that they don’t get criticized by the China hawks for being weak,” said Willems, adding, “I do think we’re going to see some movement pretty soon.”

In May, Biden said he could drop some of the tariffs imposed against Chinese imports to help control rising consumer prices in the U.S.

The White House is currently reviewing the penalties imposed under former President Donald Trump — which raised prices on everything from diapers to clothing and furniture. The process was triggered by legal provisions, rather than a U.S. political willingness for a reset in relations.

I think the optics are an important part of this and the president has been criticized for not doing much on inflation.

Clete Willems

partner at Akin Group

Long-term strategic goals

Willems said the Biden administration is interested in looking at rationalizing the list over a longer term horizon and making it more strategic. That could include a broader range of tariff reductions as well as perhaps some tariff increases in areas where they think it’s important to achieve their supply chain goals, he added.

“I think we’re going to see something relatively modest in the short term. But over the long term, what I’m hopeful is that this will lead to a process that tries to rationalize things more broadly and link them more closely to their supply chain objectives,” he said.

Some economists have estimated removing tariffs on imported Chinese goods will strip 1% off inflation in the U.S. over time and return confidence to the economy. This could help Biden’s standing ahead of the midterm elections later this year.

“I think the optics are an important part of this and the president has been criticized for not doing much on inflation and they clearly want to illustrate that they’ve heard that and they are being responsive,” said Willems.

Treasury Secretary Janet Yellen has also said some tariffs on China served “no strategic purpose” and that Biden was considering removing them as a means of cooling inflation.

“I think that there’s…