Announcing trade pact to counteract China, Biden says recession is avoidable

(CN) — President Joe Biden on Monday announced a new trade framework with 12 Indo-Pacific countries directed at countering China's economic dominance in its region but gave little insight as to how it will address concerns about rising inflation.

The White House said the deal will encourage international collaboration on supply chains, clean energy commitments, worker protections and rules for digital trade while bringing stability to the international economy, which has been rocked by Russia's war on Ukraine and the continued fallout of the Covid-19 pandemic. But the specifics of the agreement have yet to be negotiated, making it unclear what policies will end up directing international trade and whether they could improve an aching U.S. economy.

Members of the new economic pact include Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam. Together with the United States, the nations represent 40% of the global GDP, according to the White House.

Biden announced the new trade framework during a visit to Tokyo on Monday, part of the president's first visit to Asia since his ascendence to the White House.

The U.S. has focused heavily during Biden's first term on parsing out economic strategies and policies to curb China's near-monopoly on economic power in the Indo-Pacific. While Congress is negotiating a comprehensive China competitiveness bill that would fund domestic manufacturing of semiconductors with the aim of reducing U.S. dependence on Chinese products, Biden himself has focused on ramping up U.S. production in recent months.

Monday's announcement falls in line with these previous efforts by the administration, but the new trade framework falls short of providing low tariffs and special trade deals to member nations, stoking doubts about its ability to develop a strong sphere of influence in the Indo-Pacific.

The regulatory deal stands in sharp contrast to the Trans-Pacific Partnership, a trade deal negotiated under the Obama administration that President Donald Trump pulled the United States out of amid opposition to the plan from lawmakers on both sides of the aisle.

But 12 nations moved forward with the TPP deal after America's departure, and China is trying to join the partnership.

The U.S. is grappling with sky-high inflation as consumer prices rose last month by a margin not seen in nearly 40 years, straining the pocketbooks of American families and the president's approval ratings headed into midterms.

During a news conference in Tokyo, Biden acknowledged that inflation in the U.S. is not going to dissipate quickly, but he said he does not believe that a recession is an unavoidable reality.

While the U.S. is focused on countering China, this economic turmoil has raised questions about whether the administration will consider lifting Trump-era tariffs that apply to consumer and industrial goods from China, placing a tax of up to 25% on these imports. Chinese imports have not been a main driver of inflation in the U.S., but some analysts say lifting or reducing the tariffs could provide slight relief to U.S. prices.

A coalition of retailers, known as the National Retail Federation, penned a letter to Biden last week, urging for the elimination of the tariffs and estimating that doing so could reduce consumer prices by 1.3%.

While some administration officials have been cagey about the future of the tariffs, the administration has been quick to point to China's similarly struggling economy.

China's projected GDP growth for 2022 expects to land at 2%, while Bloomberg Economics projections put the U.S. at an estimated 2.8% growth.

“The fact that the United States will grow faster than China this year, for the first time since 1976, is a quite striking example of how countries in this region should be looking at the question of trends and trajectories,” Jake Sullivan, White House national security advisor, told reporters aboard Air Force One the way to Tokyo yesterday.

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