Biden Could Lower Tariffs on Chinese Goods. What Would That Mean for Investors?

A Bloomberg report states that US President Joe Biden is considering removing some of the tariffs imposed by his predecessor, Donald Trump, on more than $300 billion in Chinese imports as his government desperately tries to slow the rapid increase of prices. This information was made known to Bloomberg by those familiar with the discussion.

US Treasury Secretary Janet Yellen and China's Vice Premier Liu He hold virtual talks

The US and China discussed global issues and their relationship on Tuesday. Notably, US Treasury Secretary Janet Yellen had a "substantive conversation" with Vice Premier Liu He of China. The United States started the talks, and the Chinese administration characterized the discussion as "constructive" and "pragmatic."

Both countries concurred that there are substantial economic issues facing the world today. The call also emphasized the need for better policy cooperation. Although the US summary of the meeting did not specifically mention tariffs or penalties, several financial media outlets speculated that President Joe Biden would announce a reversal of some tariffs on Chinese imports as early as this week.

Biden Could Potentially Ease Tariffs on China and The Effects

According to Bloomberg, Biden has not yet made up his mind about whether or not to lower tariffs. During the Trump administration, tariffs were put in place on $350 billion worth of Chinese imports in response to the trade war. However, lowering these levies would give consumers and companies some respite, given that inflation is at 40-year highs. In addition, lessening tariffs might make people more inclined to buy products. The companies that sell these products can also profit from the rise in demand.

The advantages of lowering these tariffs are still relatively unknown. According to CNN, inflation in the United States has only "marginally contributed" despite tariffs imposed on Chinese imports. Retail items like bicycles, baseball⚾, and shoes are among these products. A reduction in tariffs will benefit companies like Walmart ($WMT) and Target ($TGT).

The lowering of tariffs could nevertheless indirectly reduce inflation. Reduced tariffs may force importers to drop their pricing, which may force competitors to do the same. Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, predicts that the indirect effects of lower tariffs would be "far higher" than the direct effects. He adds that it might take up to a year for consumers to notice the decreased rates.

Conclusion

Reduced tariff is generally good news for any business. The commoner will feel the ripple effect in the long run and invariably increase the demand for imported goods. If President Biden consents to reduced tariffs, this might be the best time to invest in importation.

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Summary

• On Tuesday, US Treasury Secretary Janet Yellen and China's Vice Premier Liu?? held a virtual call to discuss macroeconomic issues, according to both parties' official statements.
• Following the conversation, several media outlets suggested President Joe Biden would lower taxes on Chinese imports.⛴️
• Sanctions or tariffs, however, were not mentioned in the US readout of the conversation.

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