Daleep Singh, US deputy national security adviser for international economics, has given a bit of shocking advice- let’s reduce sanctions on Chinese goods to combat soaring inflation.
But why this sudden announcement? Let’s find out.
Daleep Singh bats for reducing tariffs on ‘non-strategic’ Chinese goods
Singh said that Washington is considering reducing tariffs on non-strategic goods from China like bicycles and apparel to combat skyrocketing inflation.
Singh said, “While they may have created negotiating leverage, they serve no strategic purpose.” He added, “Our opportunity … is to reframe the purpose of these tariffs so that they’re advancing real, strategic priorities of the United States.”
Now, this may sound like an abrupt move. But you need to understand the context in which the Biden administration is doing this.
China’s UnionPay backs away from Russia
Recently, it was reported that China’s UnionPay has refused to cooperate with Russia’s biggest lender Sberbank and has also suspended talks with other banks due to fears of secondary sanctions.
UnionPay was earlier being touted as an alternative to Visa and Mastercard in Russia.
Similarly, China has suspended scientific cooperation with Russian institutions.
China’s actions were perceived as an attempt to placate the West. The US and its allies were concerned about the proclamation of a “no-limits” friendship between Moscow and Beijing. This meant a threat of sanctions and tariffs against Beijing if it engaged in any sort of cooperation with the Russians.
Biden’s gifts to China
In March, Biden announced that his administration will reinstate tariff exemptions for 352 Chinese products, which were first hit with punitive tariffs during the Trump era. The US Trade Representative (USTR) had then said, “Today’s determination was made after careful consideration of the public comments, and in consultation with other US agencies.”
Now, this was a major gift for the Chinese and an offer of sorts from Biden. The US President was telling the Chinese Communist Party (CCP) that regardless of your crimes, I am happy to reward you if you do as I say.
Xi Jinping probably understood Biden’s message and tried to test the Biden administration by abandoning Russia. And guess what? It actually worked. Biden has reciprocated with a plan to remove tariffs on ‘non-strategic’ Chinese goods. If China gets somewhat critical of Russia, Biden may even cooperate in the semiconductor sector with the Chinese.
From China’s perspective, Biden’s proposal is quite lucrative. Remember, China is currently in the middle of a major economic crisis. The real estate downfall and trade wars had already ravaged its economy, and now a major COVID-19 wave in the country is sabotaging the Chinese economy. Therefore, Xi desperately needed some good news and Biden has given that good news to him.
Xi would have been more than happy to sign a secret deal with Biden, wherein the US drops tariffs on Chinese goods and China abandons Russia. From the way things are going, it seems that the deal has already been inked.