Biden economic adviser: ‘We are reviewing’ current tariffs in place

Bharat Ramamurti, deputy director of the National Economic Council, joins Yahoo Finance Live to discuss the Biden administration's approach towards U.S.-China relations, the ongoing supply chain crisis, the labor shortage, inflation, and current baby formula shortage.

Video transcript

DAVE BRIGGS: All right, as we speak, President Biden making his first trip overseas to Asia. As president, he'll meet with South Korea's newly elected president before moving on to Japan, where he'll meet face to face with the leaders of Japan, India, and Australia. With what to expect from the trip, we're joined by deputy director of the National Economic Council, Bharat Ramamurti. Good to see you, sir. Welcome onto the show. Let's talk about the president's first visit to the Samsung semiconductor plant. So what is the White House plan to solve our chip shortage and unclog the supply chain that has been such a problem over recent years?

BHARAT RAMAMURTI: So part of what the president is doing, touring that facility, is that that facility is going to be a model for a new facility that's being built right here in Texas, a $17 billion investment by Samsung that's going to create thousands of good jobs in Texas. And it's going to help bring onshore more semiconductor manufacturing capacity, which is a key not just for prices, but also for making sure that our supply chains are more resilient.

As you noted, one of the things that the president has been really focused on since the beginning of his term, as making more stuff in the United States, more manufacturing capacity. What we have seen is some record investments not only from Samsung, but from Intel, from General Motors, and new manufacturing in the United States. That's going to be new good jobs and more supply chains onshore. That means a more resilient supply chain.

SEANA SMITH: Bharat, with the president in the midst of his tour now and with his trip in Asia, the spotlight has really been on China's policy and what we are seeing there. So the big question is, when it comes to tariffs, there's reports that there are internal heated debates now, just in terms of who is pushing for what. Treasury Secretary Janet Yellen reportedly does not want tariffs. And then, of course, the other side is pressing for the president to keep tariffs. I'm curious, where do you stand in this debate?

BHARAT RAMAMURTI: Well, I'm not going to open the door to some internal negotiations and discussions about this. We are having a good discussion about which of the tariffs that we inherited are worth keeping. Now it's important to remember that as we do this holistic review, of course, the impacts of tariffs on prices and inflation is one factor. But tariffs can serve other purposes as well for national security, for industrial policy and domestic development. So we are in the midst of that holistic review. We are reviewing it, as I said, based on a number of factors. And as soon as we have something to announce, we'll announce it, but nothing to announce right now.

RACHELLE AKUFFO: And in terms of the competitiveness with China, that has been an issue, as we are now seeing perhaps more of a pivot to the rest of Asia. But then how do you strike that balancing act? Because obviously, bringing the tariffs down, a lot of economists say that is one of the quickest ways to get inflation down in the US. What do you think about the relationship between China and the US versus, say, the rest of Asia?

BHARAT RAMAMURTI: Well, since we're talking about this, it's important to note that just today, a report came out projecting that for the first time in a very, very long time, the US economy was going to grow more this year than the Chinese economy. And it's, again, a reflection of the investments that the president has made to the American Rescue Plan last year and the strength of our economic recovery in comparison to some of our global competitors.

The president has been clear that we are in a competition with China. We bring to that competition a number of strengths. And we are building on those strengths with the president's leadership. We have seen some historic investments in new manufacturing in the United States as global companies choose to invest here, rather than anywhere else because it's a great place to do business because of the strengths that we have-- our legal system, the quality of our workforce, our great education system in the United States. All of those are strengths that the president hopes to build on as we continue to have this global competition with China.

DAVE BRIGGS: The quality of our workforce is not in doubt at the moment. What is, is where we find workers. 11 and 1/2 million open jobs, more than 800,000 in the manufacturing sector alone, whether it's that Austin semiconductor plant or the other plants. Where do you find workers?

BHARAT RAMAMURTI: Well, if you look at the data, what you see is that among prime age workers, so those are workers aged 25 to 54, the percentage of those workers who are either employed or looking for work right now is equivalent to what it was before the pandemic. So those workers have come back. We've also seen data that the, quote, unquote "early retirees"-- those are people between the ages of 55 and 65-- a lot of those people left the workforce during the pandemic, and they're starting to come back at very high rates right now, because it's safer to go back to work because it's a very good time to find a job.

So, again, the strength of our economic recovery is attracting people back into the workforce at a very fast rate, relative to previous recoveries from recessions. There are steps that we can take to further improve on that. One of them, to be totally honest, is improving our care system. And a lot of people say the reason that they are not able to look for work is because they're caring for a child, or they're caring for an elderly parent or some other relatives. The care system in our country needs an incredible upgrade, and that's one of the main investments that the president has been pushing Congress to do for several months now.

SEANA SMITH: Well, Bharat, a key issue here for the president over the coming months, and could be over the next two years, depending on how this all plays out, is inflation. There was a new AP poll out this morning, really showing that President Biden's approval rating, it's at the lowest that it has been since he took office. We know the president has made inflation a priority, but that message doesn't seem to be resonating with the American voter. What else or what should the president do in order to combat high inflation?

BHARAT RAMAMURTI: Well, look, the president has been clear that fighting inflation and bringing costs down for families is his number one economic priority. It's what he focuses on the first thing in the morning and right before he goes to sleep at night. And what we have done over the last several months is take a number of steps to ease some of the inflationary pressures that we've seen. We've seen the president release a historic amount from our Strategic Petroleum Reserve, 180 million barrels. We've never come close to that before. That's intended to help fill up some of the supply shortage that we've seen because of Russia's actions in Ukraine.

We've seen a lot of work on smoothing out some of the supply chain issues that are contributing to high inflation. And there's a number of things that we are asking Congress to work on with us, whether it's increasing domestic oil and gas production in the short-term. The president has laid out some priorities on how to do that.

Whether it's going at some of the biggest costs that families face-- housing, prescription drugs, child care-- the President has made the case for investments in those areas that will provide immediate relief to families on some of those key costs. So we've debated these issues for a long time now. In the president's view, it's time for Congress to step up and act on them and provide the relief that he thinks the American people need.

RACHELLE AKUFFO: Now I do want to ask you about the back and forth that we saw between President Biden and Jeff Bezos on Twitter about inflation and the role of taxing corporations. What is your take on that? And are the two correlated?

BHARAT RAMAMURTI: Yes, there's a wealth of economic evidence and data showing that increasing taxes on large corporations, on the wealthiest households, can have an effect on bringing down inflation by taking money out of the economy. I think that that's a very well established connection. And I think the bigger picture here is that the president has a concrete plan to go at the inflation that we're seeing. Obviously, a lot of that is dependent on the Federal Reserve, and he respects the independence of Chair Powell and the rest of the Federal Reserve.

But there are some key things that we can do. We can increase taxes on big corporations and the very wealthy. He's been proposing that for a long time. He's proposed new measures like child care investments that will get more workers back into the workforce. That will also have deflationary pressure over time. So we have a plan.

What we are not seeing, if we're being totally honest, is any sort of plan from the Republicans in Congress. They love talking about inflation. But so far, the only plan that they've put out to address it is from Senator Rick Scott, which calls for increasing taxes on half the families in the United States. So we are trying to do our best with the tools that we have. But we need cooperation from Congress. And unfortunately, the Republicans in Congress don't seem to be interested in doing some of the basic things that we need to do to address inflation.

DAVE BRIGGS: Bharat, one of the biggest problems facing the president is, of course, the baby formula shortage, gone from shelves across the country. 45%, in some cases, has disappeared. And this is an economic issue because only four companies in the US controlled 90% of the supply. Almost nothing is imported due to tariffs. I know he has invoked the Defense Production Act, which could solve the problem in the short-term. But structurally, in the long-term, what does the administration need to do to make sure we never arrive at this problem again?

BHARAT RAMAMURTI: Yeah, as you said-- and I want to emphasize this because I know that a lot of families-- I have two young kids myself. A lot of families are concerned about the shortage. And what we are doing is, number one, like you said, invoking the Defense Production Act, which is going to increase the supply of baby formula in the short-term.

We have totally overhauled the rules on importing formula. And in fact, there are currently planes in Europe right now getting loaded up with safe formula from Europe and bringing that back to the United States. And of course, the FDA has now reached an agreement with Abbott to reopen the factory that was shut down for safety reasons before and that caused all these problems in the first place.

So, like you said, there are some longer term issues with this market. This is an extremely concentrated market. There is a role for government policy in addressing that in the short-term. And in the medium-term, one of the things that we can do is change some of the rules that we have about how states cooperate and select partners to work with in programs that they have that allow lower income families to get baby formula.

And the other thing we can do is support new entrants into this market. It's awfully hard for companies to break into this market. It should be in our interest to have more than a handful of companies controlling this large a share. And so we're going to look into whether there's some steps we can take to encourage more folks to enter.

SEANA SMITH: And following up on that, one of the big barriers to entry or one of the big reasons why we aren't seeing more foreign entrants here into this market is because of that tariff. It's up to 17 and 1/2%. You also have the tariff rate quotas. Do you think it will be smart, then, going forward to suspend those tariffs?

BHARAT RAMAMURTI: Look, as I said, in the short-term, we are taking all steps that we can to smooth the importation of goods into the United States. And in fact, we are literally sending planes to Europe, bringing back that formula so we can get to the shelves as quickly as possible. As you said, there are some longer-term issues here about our rules on imports, importing drugs-- not drugs, I'm sorry-- formula from Europe. And we're going to take a look at this.

I think that, unfortunately, when you have a situation like this, that's what ends up prompting a kind of holistic review of the rules that got you into this place. And we're committed to doing that because, like you said, we don't ever want to end up in a situation like this again, where families are worried where they can find formula that their children need.

RACHELLE AKUFFO: Indeed. Well, we do thank you for joining us once again. Bharat Ramamurti there, deputy director of National Economic Council, thank you so much.