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For inflation relief, the United States should look to trade liberalization

Author

Listed:
  • Gary Clyde Hufbauer

    (Peterson Institute for International Economics)

  • Megan Hogan

    (Peterson Institute for International Economics)

  • Yilin Wang

    (Peterson Institute for International Economics)

Abstract

With US inflation running at 40-year high rates, the Federal Reserve is signaling more interest rate hikes in 2021 and 2022. President Joseph R. Biden Jr. has also vowed to act against what he calls anticompetitive behavior by corporations. But policymakers are overlooking one set of actions that could make a meaningful contribution to taming inflation: trade liberalization. The data cited in this Policy Brief indicate that a feasible package of liberalization could deliver a one-time reduction in consumer price index (CPI) inflation of around 1.3 percentage points, amounting to $797 per US household, about half the size of pandemic relief in 2021. As a bonus, the embrace of trade liberalization would curb inflationary expectations taking hold in American firms now protected by trade barriers from foreign competition.

Suggested Citation

  • Gary Clyde Hufbauer & Megan Hogan & Yilin Wang, 2022. "For inflation relief, the United States should look to trade liberalization," Policy Briefs PB22-4, Peterson Institute for International Economics.
    • Handle: RePEc:iie:pbrief:pb22-4
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    File URL: https://www.piie.com/publications/policy-briefs/inflation-relief-united-states-should-look-trade-liberalization
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    Cited by:

    1. Comisión Nacional de los Mercados y la Competencia (CNMC), 2023. "Guide. Competition against inflation: How competition and efficient regulation help protect the purchasing power of consumers," Colección Estudios de Mercado G-2022-02_ENG, Comisión Nacional de los Mercados y la Competencia (CNMC).
    2. Dadush, Uri, 2022. "The future of global value chains and the role of the WTO," WTO Staff Working Papers ERSD-2022-11, World Trade Organization (WTO), Economic Research and Statistics Division.
    3. Maurice Obstfeld, 2022. "Global Economic Recovery in the Face of COVID-19," Chapters, in: Lili Yan Ing & Dani Rodrik (ed.), New Normal, New Technologies, New Financing, chapter 3, pages 22-37, Economic Research Institute for ASEAN and East Asia (ERIA).

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