While touring the crucial swing state of Pennsylvania, President Joe Biden is urging the U.S. Trade Representative to treble the tariff rate that China imposes on imports of steel and aluminium.

The president is scheduled to visit the United Steelworkers headquarters in Pittsburgh on Wednesday.

In an attempt to demonstrate that his administration’s recent warnings about China’s trade policies are not just hollow threats, Biden has demanded an increase in the average tariff now in place on steel and aluminium, which is 7.5%.

Treasury Secretary Janet Yellen expressed concern last week during a visit to China that Chinese subsidies were causing an excess supply of clean energy items, such as electric cars and solar panels, that would surpass local demand.

She was concerned that excess capacity might be pushed onto international markets at inflated costs, which might discourage competition.

Yellen stated in an interview that tariffs were still a possibility if the overcapacity concerns weren’t resolved.

Since then, Chinese officials and state media have refuted the claim of overcapacity, asserting that the country’s plentiful supply of sustainable energy goods is the consequence of “continuous innovations” rather than government handouts.

The Biden administration is intensifying its efforts to counter what it sees as China’s overcapacity concerns on global trade.

“China’s policy-driven overcapacity poses a serious risk to the future of the American steel and aluminum industry,” National Economic Council Director Lael Brainard said on a call with reporters on Tuesday. “China cannot export its way to recovery. China is simply too big to play by its own rules.”

In an attempt to balance election-year politics with a precarious geopolitical environment and growing apprehensions about the health of the US economy, Biden has intensified his effort to raise tariffs.

On the one hand, the former president Donald Trump’s initial round of tariffs on China nearly started a full-fledged trade war, which is why the White House is still trying to warm relations with China after several years of nearly frozen contact.

Tariffs may also have unforeseen consequences on the economy by increasing the cost of production in the United States, which could eventually result in higher consumer prices. That would be an undesirable outcome at a time when Biden is already engaged in a protracted fight to curb rising prices and convince people that his economic plan is effective.

On Tuesday, a senior administration official denied the idea that higher tariffs would cause inflation to increase.

In a call with reporters, the official stated, “If taken, these actions will not increase inflation, but they will protect American jobs and the steel industry.” “These actions will not change the fact that goods are not the source of residual inflation.”

Conversely, the Biden team hopes to keep up its tough stance on China in order to fight with Trump for the support of blue-collar Americans. In keeping with that, Biden will also state that he is still against the planned sale of U.S. Steel to Nippon Steel of Japan.

“It’s important that U.S. Steel remains a domestically owned and operated company,” a senior administration official said Tuesday. “The president will make that clear again. He has told the steelworkers he will have their backs and he means it.”

(Adapted from CNBC.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy