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How Free Trade Can Fight Inflation
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How Free Trade Can Fight Inflation

More Competition Means Lower Prices

Gary Hufbauer, Megan Hogan and Yilin Wang
Foreign Affairs, 2022
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Inflation in the United States continues to run at a four-decade high in 2022. Energy costs, the Russian–Ukraine war and trillions of dollars circulating throughout the economy take much of the blame. But restrictive tariffs, set against a backdrop of protectionist trade policies, are an overlooked inflationary element. Economists Gary Hufbauer, Megan Hogan and Yilin Wang argue that slashing trade levies could reduce input costs for firms and thereby tamp down prices. Investors and executives will find this a timely and insightful assessment of US inflation.

Summary

US trade policy is feeding inflation.

President Joe Biden has maintained the trade policies of the Trump administration. Those measures consist of a mix of tariffs, quotas and levies on China and other trading partners on imports of products like steel, aluminum and appliances. 

In addition, the Biden administration has expanded the Buy America program, which blocks US government purchases of designated foreign products and services. The government also maintains provisions of the Jones Act, which prohibits non-US shipping companies from moving goods between American...

About the Authors

Gary Hufbauer is a nonresident senior fellow at the Peterson Institute for International Economics, where Megan Hogan and Yilin Wang are research analysts.

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