Cut Tariffs to Help Inflation and Ukraine

A modest easing of border taxes could lower inflation by 1.3 points

WSJ editorial.

"President Biden is deploying gimmicks to try to show the public that he is fighting 8.5% inflation, but here’s something he could do that really would help: ease President Trump’s destructive tariffs. This isn’t a panacea. But while prices keep rising, the feds could at least stop making products more expensive on purpose.

A recent paper from the Peterson Institute for International Economics shows the tangible effect that smarter trade policies could have. “A feasible package of liberalization,” it says, “could deliver a one-time reduction in consumer price index (CPI) inflation of around 1.3 percentage points.”

Last week’s CPI report shows that prices are up 8.5% from a year ago. A modest easing of tariffs, in other words, could counteract a meaningful portion of that inflation, which is better than what Mr. Biden is doing. He is releasing oil from the Strategic Petroleum Reserve and permitting summer sales of E15 gasoline, neither of which will matter much. On the other hand, the trade remedy “would amount to $797 per US household, about half the size of pandemic relief in 2021,” the Peterson report says.

Tariffs are taxes. They’re paid by consumers. They make U.S. manufacturing less competitive by driving up the price of inputs like steel. The Peterson report says Mr. Trump raised the cost of Chinese imports by $81 billion. Mr. Biden could aim for overall tariff relief of two percentage points, which comes out to $56 billion in savings. Imports “contribute to 12 percent of the CPI,” and a share of those lower costs “would quickly reach consumers through lower prices at retail outlets,” the authors say. Increased competition would put downward pressure on the prices of domestic goods.

Since the poor spend more of their money on consumption, the report adds, “trade liberalization counts as progressive policy in the same way that cutting a sales tax is progressive policy.” This should also appeal to Republican Senators who claim to be the new tribunes of working people—unless their real trade-policy motivation is corporate welfare.

The White House could further target the tariff relief to staples like clothing and school supplies. Because the President has been granted broad trade power, Mr. Biden could act on at least some of this agenda with the stroke of an autopen.

Good trade policy is also good geopolitics. Sens. Pat Toomey and Dianne Feinstein wrote Mr. Biden this month asking him to “remove the 25 percent U.S. tariff on steel imports from Ukraine to help it eventually stabilize and rebuild its economy.” The immediate effects might be muted, given how the Russian invasion has hampered Ukrainian industry.

But in the longer term it’s a win-win-win: Let Americans buy Ukrainian steel without a hefty border tax, improving competitiveness for U.S. manufacturers. Trim inflation. And help a country struggling for freedom regain its economic footing. What is Mr. Biden waiting for?"