Expert: U.S. is damaging itself for putting tariffs on China
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Removing additional tariffs on Chinese goods will significantly ease the pressure on companies in both China and the United States, and help the world to curb inflation, experts said on Wednesday (May 4).
Their remarks followed the Office of the United States Trade Representative, or USTR, announcement on Tuesday of the commencement of the statutory four-year review of the continuation of the US "Section 301" tariffs on Chinese products.
In the four-year review, the USTR will examine the tariff actions on Chinese-origin products from July 6, 2018 to Aug 23, 2018.
Based on this review, the US government can determine whether to maintain the tariffs, change the tariff rates, or remove the tariffs.
In the first quarter of this year, China-US trade grew 12 percent year-on-year to $185.92 billion, data from China's General Administration of Customs showed.
According to Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing, the additional US tariffs on Chinese products have put heavy burdens on US companies and aggravated inflation levels in the country.
In the US, many businesses involved in trade have been seeking rollback of the additional tariffs on Chinese products.
Besides, many of the tariffs were levied through administrative orders rather than being based on relevant laws. This led to a series of complaints and lawsuits that challenged the authority of those orders issued by the former administration, he said.
In the two-step review process, the first step is for the USTR to offer an opportunity for US domestic industries that benefited from the tariffs to request their continuation. Legally, the tariffs are to terminate four years after their application, if no US party submits a request that they be continued.
If there are requests to continue, the tariffs are received, under the statute the following step requires the USTR to undertake a review of the effectiveness of the "Section 301" tariffs on achieving their objectives and their impact on the US economy and consumers.
Cancelling the additional tariffs on Chinese products will also help many parts of the world to curb inflation, because stable product and commodity supplies from China and the US – the world's two largest economies – will facilitate the world to build strong industrial and supply chains, said Zhang Yongjun, deputy chief economist with the China Center for International Economic Exchanges.
As the US dollar is a global currency, the increase in its supply, which far outpaced that of other global currencies like the euro, directly pushed up prices in the US, besides fueling inflation worldwide, which has been exacerbated by the Russia-Ukraine conflict, he noted.
Amid global inflation and growing pressures on the global supply chain, tariffs have become an inconvenient factor that inhibits enterprises from conducting international trade cooperation, said Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing.
China and the US, he said, should not only remove additional tariffs imposed during their trade disputes, but even further reduce tariffs to make them even lower than the pre-dispute levels. That will significantly boost expectations on normal global supply chain operations, bolster market confidence and facilitate global economic recovery.
"As the world's two largest economies, healthy bilateral relations between China and the US are important not only to them but the world, as the global economy has been facing a number of uncertainties in recent years," he said.
Woody Guo, president for China unit at Herbalife Nutrition, a US-based manufacturer of nutrition products, said it is beneficial for China and the US to enhance their ties in the area of trade and economic cooperation.
"In China, consumption upgrade and domestic demand expansion will help the country to grow its consumer base under the dual-circulation development paradigm, providing huge growth potential for foreign enterprises, including Herbalife Nutrition," Guo said.
Easing restrictions: The US and Chinese flags outside a hotel in Beijing. American tariffs on hundreds of billions of dollars of Chinese imports are due to expire in July, but could be extended if enough industries ask for an extension. — AFP
WASHINGTON: The United States government should eliminate or at least reduce additional tariffs on Chinese imports imposed during the Trump administration, a US trade expert says, arguing that such trade liberalisation measures will help lower elevated inflation and stabilise inflation expectations.
“Here, we’re running a red hot economy. So anything you can do to reduce that cycle is good news,” Gary Hufbauer, non-resident senior fellow at the Peterson Institute for International Economics (PIIE), told Xinhua in a recent phone interview.
In a research published on PIIE’s website, Hufbauer and his colleagues Megan Hogan and Yilin Wang argued that “a feasible trade liberalisation package” could deliver a one-time reduction in consumer price index (CPI) inflation of around 1.3 percentage points. That would save US$797 (RM3,467) for every US household.
He said the direct effect of eliminating additional tariffs on Chinese products would be a 0.3 percentage point reduction in the CPI, but there would also be indirect effect, which will add “substantially” to the 0.3 percentage point.
“It would be a pretty big signal to US firms that they are going to face more competition and that might cause them to moderate their price increases as inflation rolls forward,” said the long time trade expert.
“We’re in a world now where inflation expectations are really quite high,” Hufbauer said, noting that US Federal Reserve’s (Fed) interest rate hikes would have some effect on inflation expectations, and trade liberalisation measures “would have an additional effect.”
Stabilising inflation expectations is important, he said, because when expectations are that inflation is going to continue, “that then feeds into wage demands and that then keeps the cycle going.”
According to the latest data from the US Labour Department, the CPI in March surged 8.5% from a year earlier, the largest 12-month increase since the period ending December 1981. That followed a 7.9% year-on-year gain in February.
US personal consumption expenditures price indexes, the Fed’s preferred inflation measure, soared by 6.6% in March over the past year, the Commerce Department reported on Friday.
In reaction to the argument that reducing the China tariffs would not lead to a meaningful reduction in prices, Hufbauer said it doesn’t completely eliminate the inflation problem, “but it’s better than doing nothing.”
“So there’s raising interest rates, there’s cutting back federal spending, there’s reducing tariffs, all of those things have some impact,” he said. “I would say it’s something where every little bit counts.”
Regarding the current political environment, Hufbauer said he thinks it will be difficult for the administration to reduce or eliminate additional tariffs on Chinese imports before the mid-term elections, but he hopes that it will do that.
The trade expert said he is “very encouraged” by a recent statement by Deputy National Security Adviser Daleep Singh, who said the Biden administration could lower tariffs on non-strategic Chinese goods such as bicycles or apparel to help curb inflation.Hufbauer noted that the Biden administration could be reluctant to remove the Trump-era tariffs, because it would have to face criticism for being “soft” on China.
International scenario likely to affect trajectory
“Hopefully we will start to see private investments gaining traction, but this depends very much also on what is going on in the international front, especially in terms of the Russia-ukraine war and global inflation.” Carmelo Ferlito
Despite being on a recovery path, the country’s economic growth trajectory could be affected by uncertainties on the global front.
PMalaysia’s gradual and controlled easing of Covid-19 restrictions as it transitions into edemicity is set to give the country’s economy a much needed boost.
Despite being on the recovery path, economists have however cautioned that Malaysia’ economic growth trajectory could still be affected by uncertainties on the global front.
Malaysia University of Science and Technology professor Geoffrey Williams said the ongoing Russia-ukraine war, China’s lockdowns and likely austerity in the United States and Europe are key factors that could have an impact on Malaysia’s gross domestic product (GDP) growth.
“The expected negative outlook of the international economic scenario will determine the outcome of Malaysia’s second quarter GDP, not Covid-19 and borders reopening, which we expect to play a marginal role in this phase,” he told Starbiz.
In a base case scenario (which refers to a set of basic assumptions where the results would lead to the most realistic outcome), Williams said Malaysia’s second quarter GDP is forecast to increase 1.3% quarter-on-quarter and 2.6% year-on-year.
“This scenario implies that the GDP will be flat over the first half of 2022. This is in contrast to the consensus view of a rampant recovery with a yearly growth figure close to 5.5% and 6%. In our base scenario, we think that a 3.5% year growth is more likely.”
Malaysia
University of Science and Technology professor Geoffrey Williams said
the ongoing Russia-Ukraine war, China’s lockdowns and likely austerity
in the United States and Europe are key factors that could have an
impact on Malaysia’s gross domestic product (GDP) growth.
In a risk scenario, Williams said he foresees Malaysia’s GDP “going into slightly negative territory”.
“In our base scenario, we expect to see a systematic and progressive recovery, consistent with the potential rate of growth of the economy only in the second half of 2022.
“The contribution of the external demand is expected to be close to zero, reflecting the international cyclical weakness we are already observing in the US, European Union and China,” he said.
Malaysia, which has been gradually easing its Covid-19-related standard operating procedures since late last year, finally reopened its borders to international travellers from April 1.
Last week, Health Minister Khairy Jamaluddin announced a slew of relaxations to Malaysia’s Covid-19 restrictions.
Centre for Market Education chief executive officer Carmelo Ferlito said the relaxation measures announced recently would be a good incentive for the tourism industry.
However, he said the impact of the relaxations would likely be better reflected in the third quarter of this year, rather than in the current (second) quarter.
“We can still expect a good momentum for export, pulled by a weaker currency (which is temporarily good for export but harmful for the economy in general).
“Hopefully we will start to see private investments gaining traction, but this depends very much also on what is going on in the international front, especially in terms of the Russiaukraine war and global inflation.”
Malaysia’s GDP expanded 3.1% in 2021, after posting a 3.6% year-on-year growth in the fourth quarter of last year.
In a base case scenario, HELP University economist Dr Paolo Casadio said Malaysia’s first quarter 2022 GDP is projected to shrink 1.5% quarter-on-quarter and contract 0.7% year-on-year.
Centre
for Market Education chief executive officer Carmelo Ferlito said the
relaxation measures announced recently would be a good incentive for the
tourism industry.
“This would be due to contraction in investments, negative net external demand and stagnation in private consumption.
“We do not see a clear pattern in private consumption and investments, which would be consistent with a positive transition of the economy toward a systematic and sustained recovery.”
Casadio added that the current phase of recovery is “a delicate transition”.
“There are plenty of weaknesses and risks of a new recessionary phase, although the risk of a recession is only around 25%. Disposable income and wealth among households are not recovering due to weak real wages growth, slow increase in employment and continuing withdrawals from the Employees’ Provident Fund to finance current expenditure, even among the middle-income population.”
Ferlito, meanwhile, said he was “not a big fan of GDP forecasts” when asked about his projections for Malaysia’s economic performance for the first quarter of 2022.
“It’s because they fail to ignore how an eventual growth or decline is built. For example, GDP grew in 2021 by 3.1%, but that growth was mainly driven by government spending and private consumption.
“This means that growth is resting on very unstable pillars, being basically financed by household and government debt and inflation.”
Ferlito emphasised that private investments remained “quite stagnant” in 2021.
“The key drivers of a sustainable growth path are savings, which are not measured by GDP and private investments. “I think that beyond the GDP figure, which in itself is pretty useless, we should look at the microfoundations behind it. We will be on the right path if private investments grow, while a closer look should also be devoted to the savings dynamics, which is not captured by the GDP.”Ferlito noted that Bank Negara foresees a good rebound in private investments for 2022.
“This is what we need to hope for, although I believe that a lot of elements of uncertainty are still weighing on that, in particular for the first quarter of 2022.”
Ferlito said the political situation in Malaysia could also have an impact on the country’s GDP performance.
“Hopefully we will have elections with the emergence of a strong majority supported by a reformist agenda. Then there is the big issue of China, which in 2021 accounted for 15.5% of Malaysian exports. China is Malaysia’s first trade partner and therefore their utopic approach to Covid-19 will surely have an impact on our economy.”
Ferlito added that geopolitical uncertainties in Europe could also have an impact on Malaysia’s economic performance.
“Europe accounts for around 7% of the international trade of Malaysia, both in terms of import and export. Troubles there will lead to repercussions here.”
Williams said the focus at the moment should be on price stability and maintaining expansionary credit conditions.
“The government has managed the containment of inflation well up to now, through the control of petrol and other prices. But it was an error to allow the hike of the electric tariffs for the non-residential users in March. This is adding perhaps 0.5% to the outlook of inflation in a very critical phase.”
Williams said this hike should be reversed to guarantee a low level of inflation, which is necessary to support the purchasing power of salaries.
“This would be possible by redistributing the gains and costs of the increase in oil and gas that the different government-linked companies are experiencing and avoids penalising firms and households.”
Casadio meanwhile said he expects Bank Negara to maintain the current expansionary conditions and not revise the official interest rate of the monetary policy until the second half of 2022.
BEING able to walk again must be the deepest wish of every wheelchair user. The sense of helplessness that comes with being unable to walk is especially felt when they need to go out to attend to business because not every place is wheelchair friendly, and not everyone is kind and helpful.
My wife became a wheelchair user several years ago. To make the situation worse, both of us are already in our sunset years. But in spite of this, we don’t have problems going to places where there are ramps or elevators, such as malls or hospitals. Otherwise, going out would be really challenging.
Recently, my wife was required to go personally to a bank in Pantai Jerjak in Sungai Nibong, Penang, to set up an online account.
Being able to do her banking transactions online is now necessary for her because the bank is no longer serving wheelchair-bound customers waiting in their cars.
As the bank is situated among a row of shophouses, accessing it could be difficult for a wheelchair user. I therefore went a day earlier to survey the area. I noticed that the most difficult part would be for the wheelchair user to get onto a nearly 30cm-high step that leads to the lobby because the bank is on a higher level than the five-foot way.
I explained my problems to a bank employee in charge of walkin customers. She told me not to worry as I could enter through the ATM area where there’s a wheelchair ramp. The shutter wall between the ATM area and bank’s lobby could easily be rolled up, she said.
With this assurance, I brought my wife to the said bank a few days later. It was certainly an uphill task for an elderly man to push someone in a wheelchair across a road and raised sidewalk that was uneven and rough. Thankfully, when we reached the five-foot way in front of the bank, a bank employee came out and led us to the ATM area. The shutter was also rolled up almost simultaneously.
Anyway, my wife couldn’t have her online banking account set up because her thumbprints are not readable. She was told that she needed a letter from the Registration Department to facilitate the process.
As we were about to leave, I requested the bank employee at the entrance to kindly roll up the shutter. We were shocked when she said she did not have the key to do so, and directed us to exit by the main entrance. In dismay, I asked loudly why this employee had no empathy at all for the elderly and a wheelchair user.
Another employee kindly came to our aid and had the shutter rolled up immediately. Before leaving, I told the unkind employee to her face, “The key is always there, but you refused to lift a finger to help!”
Everyone will grow old one day and, more likely than not, suffer from serious health problems.
Hopefully, the bank will continue to reach out to customers who are in dire need of assistance.
