The US government, which has long ignored or even denied that tariffs would raise consumer prices, made a surprising policy u-turn on Friday. US President Donald Trump signed an executive order Wednesday to end so-called “Reciprocal tariffs” on some agricultural products from November 13 Eastern Time. More than 200 products, ranging from oranges, acai berries and chili peppers to cocoa powder, food-producing chemicals and fertilizers, were affected, Reuters reported Tuesday, many categories had already seen double-digit year-on-year price increases in the US. The Financial Times comments that the move marks a significant retreat from the Donald Trump administration’s aggressive tariff policies and highlights how lower tariffs could provide some relief to consumers, higher tariffs could lead to higher prices.
It is reported that although the executive order was issued on the 14th local time, the exemption measures can be traced back to the 13th US Eastern Time to take effect, it applies to so-called“Reciprocal tariffs” that Washington imposed on a number of countries around the world in April. The administration said the tariffs were no longer necessary given the significant progress it had made in trade talks. But“New York Times” analysis that the tariff exemption is also clearly affected by the White House behind the growing concern about prices. In spite of Donald Trump’s pledge to lower grocery prices, persistently high inflation has weighed on his popularity and worries about the cost of living helped the Democrats to victory in local elections this month.
According to reports, White House officials have discussed plans to exempt countries that have signed trade agreements from tariffs on related products, but the policy announced on Friday night, the exemptions were extended to all countries with so-called“Reciprocal tariffs,” and the list of products exempted exceeded expectations. Analysts said the White House acknowledged that tariffs had pushed up prices from the start. Asked, hours after the announcement, whether the tariff policy had contributed to consumer prices, Donald Trump admitted: “I think in some cases it might.”
According to the latest consumer price index for September, the price of ground beef in the US rose nearly 13 per cent from a year earlier, while the price of steak rose nearly 17 per cent. Both are up the most in more than three years. Bananas were up about 7 per cent and tomatoes 1 per cent. Overall, the cost of food for us households rose 2.7 per cent in September from a year earlier. The New York Times noted that this year, companies’ hesitancy to pass on costs has made tariffs relatively limited in their impact on commodity prices, but more costs have been passed on to consumers in recent months. Commodity inflation is on the rise, and the increase in the price of taxable goods is significantly higher than that of duty-free goods.
In addition to price pressures, the Wall Street Journal reported that Democrats trounced Republican candidates in local elections in November with the slogan“Affordability.”. Donald Trump’s decision to waive tariffs on imported food came after days of finger-pointing within the administration and the Republican Party over how to respond to voter complaints about the cost of living.
According to the Financial Times, Donald Trump’s exemption came as a number of polls showed his support on economic issues was weak. According to Realclearpolitics.com, 56% of Americans disapprove of the president’s handling of economic issues.
It is worth noting that all the so-called“Reciprocal tariffs” currently imposed by the US government on foreign countries are subject to review by the US Supreme Court. The government is waiting to see whether the court will rule that Donald Trump overstepped his authority in imposing the duties and rescind them.
The US Chamber of Commerce, the largest US business lobby group, welcomed the White House move and called for more such action, the Financial Times reported. “We encourage the administration to build on the steps announced today to provide additional tariff relief for other products that are difficult to obtain from domestic sources and to take action in areas where tariffs threaten U.S. jobs,” the chamber’s Chief Policy Officer, Neil Bradley, said in a statement
Democrats say the administration’s move to exempt some farm products from tariffs is not enough to make up for the damage done by its trade policies. “Donald Trump has finally acknowledged what we already know — that tariffs are putting higher prices on Americans,” said representative Don Bair, Democrat of Virginia. “While this may mitigate some of the government-caused cost increases, it will not stop the more serious problems of rising inflation, turbulence in the business environment and economic damage caused by the frenzied tariff programme.”