(CapitalWatch, June 21, New York) Worries are mounting about the possibility of an oncoming recession, and the Biden administration is considering cutting back Chinese tariffs to combat it.
President Biden could remove the tariffs without congressional approval through temporary exclusions or an executive order. But the tariff campaign on China, started by former President Donald Trump, has seen bipartisan popularity.
Between the trade and audit wars, China-U.S. tensions remain high. But analysts say the bitter exchanges haven't amounted to much, whereas research showed that the tariffs resulted in increased inflation for American consumers and producers.
Now that economic conditions are growing increasingly precarious, lifting the tariffs may be one of few options to stave off a recession.
The Fed implemented record-setting interest rate hikes earlier this year and inflation went up to 8.6% in May, at a four-decade high. The national average for gas prices soared to $5 per gallon and sat at $4.9 as of Tuesday. The costs of goods are expected to stay high throughout the year.
On its side, China is also facing a sluggish economy after sweeping pandemic lockdowns. At the same time, it is emerging from a slowing, but still active, regulatory crackdown on monopolies and data privacy.
Removing the tariffs has the potential to boost both countries' economies significantly.
Speaking on CNN's "State of the Union" earlier this month, former U.S. treasury secretary Larry Summers said a recession is "more likely than not." He was among the officials who urged the administration to lift the tariffs.
Former U.S. ambassador David Adelman told CNBC that removing tariffs on imports from China could cut U.S. inflation by 1% over time.
Both counties are being hit by tumultuous markets. The financial strain may just be enough to outweigh the United States' desire to limit trade with China.