By Paulo Trevisani

The U.S. government needs to support local industries and reduce its dependence on import of key items such as chips and steel to mitigate the risk of supply shortages and inflation, Commerce Secretary Gina Raimondo said Friday.

"We are undergoing a review to see whether it makes sense to provide some tariff relief or exclusion" to some products, Ms. Raimondo said in a pre-recorded panel shown at the Sabew conference in New York.

She said the Federal Reserve's monetary policy is a "much more powerful tool" to deal with inflation, but her office is also trying to address the issue.

Ms. Raimondo said reducing tariffs is a delicate balancing act, as many of them have been imposed to protect American companies from unfairly low-priced imports. She addressed tariffs on foreign steel and aluminum in particular.

"The reason why these [tariffs] were created is because countries, particularly China, have flooded the United States with cheap steel at depressed prices which is bad for [American] workers," she said.

"You can't have a strong economy if you allow your steel industry to wither," she said.

But tariff reduction could happen when needed, she said. Earlier this week, the Biden administration lifted tariffs on Ukrainian steel for one year as a way to help the country in the war with Russia.

Ms. Raimondo called for the creation of a government agency in charge of monitoring supply chains and preventing shortages.

Ms. Raimondo also said that an investigation on imported solar panels will continue in accordance with current regulations. The probe has been criticized for potentially hurting a key source of renewable energy at a time of rising fuel prices.

"The reason why we're in this mess is because we don't have enough domestic production," she said, adding that if import tariffs are imposed as a result, they would likely be in the 10% to 15% range.

She also said the U.S. may need to subsidize domestic production of microchips to reduce its dependence on imports of a key part of everything, from home appliances to cars to defense equipment.

"I don't love subsidizing companies, these are profitable companies, but we need them," she said. "It is in our national security interest."

Write to Paulo Trevisani at paulo.trevisani@wsj.com

(END) Dow Jones Newswires

May 13, 2022 10:38 ET (14:38 GMT)