GT Voice: Removing tariffs won’t be enough to control soaring US inflation

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China United States Photo: GT

Despite the growing risk of a recession in the United States, Walmart continues to hold its own. With Walmart closing Tuesday at $124.25 per share, Wall Street analysts still remained optimistic about the stock’s longer-term outlook. What is supporting the actions of the world’s largest retailer?

Walmart’s annual revenue for the 2022 fiscal year ending Jan. 31 this year reached nearly $573 billion, which was impressive for a retailer suffering the worst of the global pandemic. The company recently raised its sales outlook this year, saying it expects net sales to grow about 4% in fiscal 2023, according to media reports.

When American consumers spend, what they buy is mostly made in China. Walmart’s steady growth has everything to do with supporting Chinese manufacturing. Many news reports often mention that estimates suggest Chinese suppliers account for 70-80% of Walmart’s merchandise in the United States, according to the Alliance for American Manufacturing.

To some extent, Walmart’s development is a microcosm of the inextricable nature of Sino-US trade. The influx of cheap and high-quality Chinese goods has actually lowered the cost of living for American households, while American retailers have benefited greatly from bilateral trade by profiting from the sales of Chinese goods in the United States.

It is because the economies of China and the United States have become inseparable that the United States’ imposition of tariffs on more than $300 billion worth of Chinese goods has failed to achieve the goal of planned decoupling. Over the past two years, the Sino-US trade value and trade surplus have maintained an upward trend despite the impact of the global pandemic and geopolitical volatility. In addition, there is growing awareness that the higher tariffs have hurt American businesses and consumers, who bear the bulk of the additional costs.

Globally, US retailers cannot find a complete alternative to China-made suppliers. Now that the US economy is becoming more fragile in a context of rampant inflation, these unnecessary costs have become particularly unbearable. The US economy is facing its most serious inflation challenge in four decades, which has already forced the Federal Reserve to be unusually aggressive with interest rate hikes. And there are fears that the United States could slide into a recession next year. In other words, the United States urgently needs to get inflation under control to help ease its domestic economic woes, and tariff cuts are apparently the most direct and feasible way to curb inflation.

US leaders including President Joe Biden and US Treasury Secretary Janet Yellen have all spoken out on the possibility of lowering tariffs on Chinese goods in recent months, but there has been no real movement yet. . Politico reported on Tuesday that Biden may be set to lift tariffs on just $10 billion worth of Chinese goods while opening a new debarment process for companies to get additional relief. If the news is real, it’s a clear indication of the Biden administration’s reluctance to drop Chinese tariffs as “leverage.”

Compared to the more than $300 billion in Chinese imports affected by tariffs, the reported figure is so small that even Walmart’s Chinese merchandise sales alone could already be well over $10 billion. Only by liberalizing imports from China on a large scale, showing courage and wisdom in releasing high-tech exports to China, and making full use of the complementary aspect of China-China trade. US that Sino-US trade can really play a positive role in getting the US economy back on track.

The weather is not on Washington’s side. The longer this drags on, the more damage it will cause to the economy and the more voters will change their vote.

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