The U.S. government is going all-out to keep up with the skyrocketing prices.
President Joe Biden asked Congress for a fuel tax exemption, and Federal Reserve Chairman Jerome Powell said he would help stabilize inflation by raising interest rates.
Links to the International Department Newsroom. Reporter Lee Seung-hoon!
Is the US price instability at a serious level right now?
[기자]
Let’s take electric vehicles, the hottest product these days, as an example.
It is said that the average cost of raw materials to make one electric vehicle recently is about 17.75 million won.
But compared to two years ago, this is almost double and a half.
The price of raw materials used to make electric vehicle batteries, such as lithium, has risen significantly.
As raw material prices rose, so did the price of electric vehicles. It is also a major reason for US price instability.
But if the price of a car is doubled or tripled just because the price of raw materials has risen, no one will buy it.
So, isn’t the first thing that automobile companies can think of in order to meet their budgets is to reduce their workforce?
That’s why people like Tesla CEO Elon Musk even say that ‘one in ten employees will have to be cut’.
The good news for the U.S. economy is the employment indicator, but that’s shaky right now.
This is the reason why it is now being said that the so-called ‘stagflation’ may come when the economy is stagnant but prices rise on the contrary.
[앵커]
The biggest reason for U.S. price instability right now is the price of oil, which continues to be at an all-time high.
Did US President Joe Biden call for legislation to waive federal fuel taxes for the next three months?
[기자]
President Biden gave a public address today at the White House.
He made such a demand, saying, ‘The fuel tax exemption won’t alleviate all the suffering of households, but it will be of great help’.
He also criticized the oil refining industry, saying, ‘Now is a time of war, and we have Ukraine’ and “lower the price.”
[앵커]
Asking for legislation would mean that the fuel tax could not be waived without the consent of Congress.
What is the reaction of Congress and the experts?
[기자]
The US government estimates that a waiver of the oil tax would reduce oil prices by roughly 3.6%.
But in Congress, not only the opposition Republicans, but also some Democrats, there are many negatives about the fuel tax exemption.
It is difficult to predict legislation.
Economists are more likely to question the effectiveness of the fuel tax exemption.
So, in 2008, when international oil prices soared after the Lehman Brothers crisis, former President Barack Obama, the then Democratic presidential candidate, said this.
He said, “The claim for a fuel tax exemption is nothing more than a show-off gimmick by politicians.”
At that time, President Obama’s running mate for vice presidential candidate was President Biden.
[앵커]
News continues that the ruling Democratic Party is now preparing to cut tariffs on Chinese products to win votes ahead of the midterm elections in November.
[기자]
Take a look at a Reuters report that came in a while ago.
U.S. President Biden said he was considering cutting some tariffs on Chinese goods, but the size of the cuts would be significant, but he hasn’t decided on specifics yet.
President Biden also announced a date that he would not make a decision on tariffs before the summit of the seven major countries in Germany until the 28th.
Looking at the news that tariffs will be lowered at first, from the word ‘possibility’ to ‘review’, and then to the specific ‘announcement time’ today, it seems likely that tariff cuts on Chinese imports will be negligible.
It wasn’t long ago that President Biden visited countries in the Pacific region, including Korea, to put pressure on China with the ‘economy’ at the fore.
However, when you look at the ‘tariff cut’, which is the opposite of this, the unrest in the United States seems to be getting worse.
[앵커]
In the midst of this, Jerome Powell, chairman of the Federal Reserve, the central bank of the United States, has expressed a strong will to put inflation to a halt as soon as possible.
[기자]
Chairman Powell attended the Senate Banking Committee today.
He said at the time, “We have clearly promised that we will catch inflation, and we are moving quickly to achieve that.”
“The financial situation in the US has tightened with interest rate hikes, but that’s appropriate and we have to move on,” he said.
“We will continue to raise interest rates until we catch inflation,” he said.
[앵커]
How was the US stock market today?
[기자]
New York stocks fell slightly.
The Dow, S&P 500 and Nasdaq all fell from 0.13% to as high as 0.15%.
This came as news spread to the market that Chairman Jerome Powell had gone to Congress and said that America’s economy could get worse.
Today, I have summarized the unstable global economy with the focus on the US price instability problem.
YTN Lee Seung-hoon (shoonyi@ytn.co.kr)
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