Get Ready For An Expansion Of Trump’s Economically Ignorant Trade War With China

President Trump appears to be ready to expand his ignorant, counterproductive trade war with China.

Last week it was reported that the Trump Administration is threatening increasing tariffs imposed against Chinese goods in the latest expansion of the President’s trade war, and China is already threatening retaliation:

President Trump escalated his trade war with China on Wednesday, ordering his administration to consider more than doubling proposed tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent, as talks between Washington and Beijing remain at a standstill.

Mr. Trump instructed the United States trade representative to look into increasing tariffs on Chinese imports like fish, petroleum, chemicals, handbags and other goods to 25 percent, a significant step in a dispute that is beginning to take a toll on industries and consumers in both countries. A final decision on the size and scope of the tariffs is not expected before September.

The effort to further punish China is being led by hard-line advisers to Mr. Trump, who believe inflicting painful measures on Beijing is the best way to force it back to the negotiating table on trade. But that approach is once again creating fissures within Mr. Trump’s own team, with his Treasury secretary, Steven Mnuchin, adamantly opposed to ratcheting up the tariffs and Peter Navarro, a key trade adviser, advocating the higher duties, people with knowledge of the discussions said. Stephen K. Bannon, who left the White House last August, has also been counseling the president to pursue tougher tariffs, according to people familiar with his thinking.

The potential for a 25 percent tax is being fueled by deep frustration within the Trump administration over its unsuccessful attempts to press China to change its trade practices, as well as by a sharp decline in the value of China’s currency. Administration officials have also been concerned that China may be manipulating prices of commodities like soybeans to harm American farmers, and hurting American companies through regulatory practices — for example, detaining shipments of agricultural products in customs until they rot.

“We have been very clear about the specific changes China should undertake,” Robert Lighthizer, the United States trade representative, said in a statement Wednesday. “Regrettably, instead of changing its harmful behavior, China has illegally retaliated against U.S. workers, farmers, ranchers and businesses.”

Since formal talks between Beijing and Washington broke down in May, Mr. Trump has doubled down on his threats, saying he is prepared to impose tariffs on all Chinese imports. Beijing has promised to retaliate with its own measures, and both countries have already imposed tariffs on $34 billion worth of each other’s products.

“China’s position is firm and clear: Pressure and blackmail from the U.S. won’t work,” Geng Shuang, a spokesman for the Chinese Foreign Ministry, said at a briefing on Wednesday in Beijing in response to reports about the 25 percent tariffs. “If the U.S. takes a further and upgraded move, China would definitely retaliate to safeguard our legal rights.”

Mr. Trump privately told advisers this week that he was intent on staying the course to punish China with additional tariffs. Mr. Mnuchin has been advising against such a move, preferring to try to engage with his Chinese counterparts to resolve their differences.

But his hand has been weakened by a recent and rapid depreciation in China’s currency, which helps to make Chinese goods cheaper in foreign markets and buoys exports. That has given hard-liners inside and outside the administration an opening to advocate even higher penalties.

(…)

The 25 percent tariffs on $200 billion worth of imports would come on top of the existing penalties on $34 billion worth of products and an additional $16 billion that are scheduled to go into effect soon. China has vowed to respond to any trade measures in kind, and it has already imposed its own tariffs on $34 billion worth of American soybeans, pork, electric vehicles and other goods.

The administration’s trade moves are aimed at forcing China to end what it calls unfair trade practices, including improperly obtaining American intellectual property. Mr. Trump’s advisers argue that past administrations have failed to sway China with diplomacy and that the United States must be prepared to take a tough stance to change its course, even if it hurts American businesses and customers in the short term.

Shortly after the news about the apparently impending new tariffs became public, China announced the retaliatory tariffs it would impose if the Trump Administration goes forward with its plan:

BEIJING — China threatened on Friday to tax an additional $60 billion a year worth of imports from the United States if the Trump administration imposes its own new levies on Chinese goods.

The threat comes just two days after President Trump ordered his administration to consider increasing the rate of tariffs it has already proposed on $200 billion a year of Chinese goods — everything from chemicals to handbags — to 25 percent from 10 percent.

The United States and China, the world’s two biggest economies, have for months been engaged in an escalating trade dispute. While they have targeted each others’ products, the interconnected nature of the global economy has meant that other regions, like Europe, have also been caught up in the back-and-forth.

Beijing and Washington imposed matching tariffs last month on $34 billion apiece of each others’ products, and have plans to add another $16 billion worth of goods to their lists. Previous rounds of tariffs cover a lengthy list of products from steel and aluminum to washing machines and even dried fruit.

The latest Chinese tariffs would, if implemented, be up to 25 percent, and cover 5,207 tariff categories, the country’s commerce ministry said in a statement on its website.

“Because the U.S. side has repeatedly escalated the tension, disregarding the interests of enterprises and consumers of both sides, China has to take necessary countermeasures to defend the country’s dignity and the interests of the Chinese people, defend free trade and the multilateral system, and defend the common interests of all countries in the world,” the ministry said.

China’s decision to threaten $60 billion of American goods is the first time this year that Beijing has not tried to match Washington’s tariffs dollar for dollar. China instead is threatening roughly two-fifths of its purchases from the United States after President Trump threatened two-fifths of China’s much larger exports to the United States, said Tu Xinquan, the executive dean of the China Institute for World Trade Organization Studies at the University of International Business and Economics in Beijing.

“It’s more proportionate,” Mr. Tu said.

China wants to find a negotiated solution to the two sides’ trade policy differences, but also could not simply ignore President Trump’s threat earlier this week, Mr. Tu added

This all began, of course, with the steel and aluminum tariffs that President Trump announced back in March, but the roots go back much further than that. Throughout the campaign for President, Trump attack President Obama and his predecessors for what he claimed were a number of “bad” trade deals that were allegedly hurting American businesses and consumers, and he singled out China as the primary focus of his ire on the trade front. This wasn’t the first time that Trump had voiced objections about international trade. When he first became a public figure in the 1980s Trump was spouting much of the same nonsense. The only difference is that, back then, his target was Japan rather than China. This was, of course, during a time when Japan was proving to be an adept competitor on the world stage and, much to the annoyance of people like Trump, Japanese investors were buying up real estate in Manhattan and elsewhere that Trump was seeking to do business. In any case, there really isn’t much difference between Trump’s rhetoric today and what he was saying in the 80s beyond the fact that his ire is now focused on China rather than Japan.

In any case, it didn’t take long for the Chinese to retaliate against Trump’s steel and aluminum tariffs, and it didn’t take long after that for the U.S. economy to start feeling the impact of the tariffs and the President’s widening trade war.

Two months after the steel and aluminum tariffs were announced, for example, The Wall Street Journal reported that prices for both foreign and domestic steel and aluminum were increasing and this was having a negative impact on manufacturers that rely on these raw materials for their products. Other reports have indicated that American pork farmers were increasingly nervous about their overseas business with nations like China due to the fact that Beijing was threatening to hit American agriculture with retaliatory tariffs. In Iowa, it was reported that Chinese retaliation for the tariffs could cost soybean farmers $624 million this year alone, with the prospect of larger losses if the retaliation continues beyond this year. This has led many leaders in Iowa and elsewhere, including Senator Chuck Grassley to express concern about the impact of the trade war on Republican fortunes in the fall. This is especially true given the fact that the tariffs seem to be expressly targeted toward Trump voters and middle-class Americans. In the time since then, we have also seen that the tariffs have had a negative impact on other American businesses, and has even led an iconic American brand like Harley-Davidson to announce that they are moving some production overseas in response to the retaliatory tariffs imposed by the European Union. Most recently last month Trump announced a new round of tariffs on Chinese goods and the Chinese responded immediately with another round of retaliatory tariffs.   impossible to completely shield Chinese companies and consumers from the full impact of a trade war.

This latest round of tariffs and retaliation isn’t officially in effect, but it looks for all the world as if they will be by the end of this month if not sooner. The negotiations between Washington and Beijing designed to deal with the trade issues that President Trump has been complaining about have not been proceeding well, and to some extent have been complicated by devaluations in China’s currency that the President apparently believes to be an act deliberately designed to sabotage the trade negotiations. Whether this is true or not is entirely unclear, but given the impact, it appears to be having on the negotiations makes intent somewhat irrelevant. In any case, we can expect more of this tit-for-tat in the future, and that’s only going to hurt the American economy and American consumers.

President Trump will no doubt blame China if the trade war leads to bad news for the economy. In the end, though, it ought to be clear where the responsibility for the trade war lies. It isn’t in China, it’s right here in the United States in the form of President Trump. Even conceding the point that some of the complaints that the Presidents has voiced regarding our trade relations with China are accurate, and they mostly aren’t the proper way to respond to them isn’t to engage in an ill-advised trade war. Instead, the proper way to respond is to take these disputes to the World Trade Organization for adjudication as that treaty contemplates, or to negotiate directly with the country alleged to be acting improperly. That’s apparently not good enough for Trump. Instead he’s surrounded himself with people such as Gary Cohn and Peter Navarro who agree with him that “trade wars are good and easy to win,” and he has convinced himself that this is the proper way to proceed. If he stays this course, then we’re all going to find out just how wrong they are.

FILED UNDER: Donald Trump, Economics and Business, International Trade, Politicians, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. OzarkHillbilly says:

    A perfect metaphor for trump’s trade policies:

    The Peak Pegasus cargo ship has been sailing in circles since it arrived, as shown on this Thomson Reuters tracking plot.

    A shipment of soya beans worth more than $20m (£15.5m) has been bobbing aimlessly in the Pacific Ocean for a month, a casualty of the escalating trade war between China and the US. Lingering uncertainty over the cargo’s fate offered a timely reminder of the fallout from a dispute that intensified on Wednesday, as the US president, Donald Trump, unveiled a second round of tariffs on $16bn of Chinese goods, prompting Beijing to respond in kind.

    The Peak Pegasus, a 229 metre bulk carrier weighing 43,000 tonnes, has become the reluctant symbol of the potential consequences of this tit-for-tat trade spat. The ship, owned by JP Morgan Asset Management, was scheduled to unload about 70,000 tonnes of American soya beans in the Chinese port of Dalian on 6 July, shortly after Trump imposed a first round of tariffs on $34bn-worth of goods.

    As it rushed to shore in the hope of clearing customs before Beijing imposed retaliatory tariffs, the ship – and its protein-rich cargo – became an unlikely internet sensation on the Chinese social media platform Weibo. However, the vessel arrived just too late and has been sailing around in circles ever since while the cargo’s owners, understood to be the agricultural commodity trading house Louis Dreyfus, decide what to do.

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  2. MBunge says:

    And from people who actually know what they’re talking about, we learn that Donald Trump may be saving the Chinese economy just as he’s saving America’s.

    https://www.cnbc.com/2018/08/09/trumps-pressure-on-trade-may-force-china-to-act-faster-at-home.html

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  3. Daryl and his brother Darryl says:

    @MBunge:

    Trump may be saving the Chinese economy just as he’s saving America’s

    Pray tell…how is he saving our economy?
    Employment growth is down; Obama’s last 18 months produced more jobs than Dennison’s first 18.
    GDP growth is, meh, coming in at about the fifth best month under Obama.
    Wages are flat.
    Inflation is up.
    Gas is up.
    Health care is up…Dennison is bending the curve back up!!!
    The stock market has been flat since the initial euphoria over the tax cut for the wealthy.
    And, oh yeah…speaking of the tax cut for the wealthy…the deficit shows the biggest growth ever in a non-recession year.
    I know you won’t respond, because cowardice is your M.O., but I felt the need to put this out there.

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  4. Lounsbury says:

    @MBunge: What a queer idiot of a drooling idiot of a troll you are.

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  5. Lounsbury says:

    @Daryl and his brother Darryl: Taking his trolling seriously is an excercise in futility.

    No one can possibly be so retarded as to seriously advance the argument that the vandal is improving the value of the house by smashing the windows as a motivation for remodeling… It’s too obviously the broken windows fallacy to be serious.

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  6. Tyrell says:

    People have complained about “made in China” “made in Japan” ever since I was a child. “Made in America” is seldom seen. The big thing back then was the transistor radio – as popular as the cell phone is today and likewise a big aggravation for parents and teachers. What we do see more of now are parts made in China and assembled in the US. There have been health concerns about some imports from China such as the drywall a few years back.
    It used to be that car owners had the pick of the “BigThree”auto makers and the parts choices were AC/Delco, MoPar, and Motorcraft. Now there are also NGK, KYB, and Denso. Those are good parts. So the quality has improved.
    There was the decline of many industries due to imports and imbalanced trade deals made decades ago. There was the “Buy American” campaign; but to our shock we found out the textile machines were made overseas. Gone are the little tags in the pockets that said “inspected by #65”. Clothing today has an assortment of sources; from Vietnam to Pakistan.
    Some textile mills around here have re-opened. Many a mill was torn down or converted to apartments or fitness centers. Some of those structures date back to the 1800’s.
    The newer textile mills here are clean, cool, safe, and quiet. And have fewer workers.
    General Electric sold their appliance division to Haier. Now they make turbines and jet engines that sell for $100 million each.
    Recent label I saw: “Made in US or Mexico”
    See: “In US, China Trade War Has Few Casualties”
    (Kenneth Rapoza, Forbes)

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  7. One American says:

    Can’t you all ever be happy about anything? Who is your dreamy candidate to save you from the horrible person making America Great Again? Hillary? Biden? Michelle Obama? Kamala? Corey or Barry himself? I truly don’t understand the hate here but y’all have a nice weekend.

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  8. Lounsbury says:

    @One American: The dream candidate would be I suppose anyone who is not an incompetent charlatan selling idiocy to gullible innumerate rubes such as yourself.

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  9. grumpy realist says:

    @One American: Having someone in charge with a slight connection to reality would be better.

    As it is, we’ve got a man-child who is a total incompetent when it comes to economic planning or engagement with the rest of the world. When we get our next stock market crash due to his stupidity I’ll be thinking of you and your support of Mr. “Making America Great Again.” Hope you enjoy sitting out on the sidewalk with a tin cup begging for pennies.

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  10. Daryl and his brother Darryl says:

    @One American:

    I truly don’t understand the hate here

    Actually if you read the comments here they are, by and large, factual criticisms of an incompetent man.
    His supporters, like you, are the ones making decisions and forming opinions based on emotion.

    making America Great Again?

    America was a lot better off before Russia put you losers in charge.

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  11. Andre Kenji de Sousa says:

    1-) New York and California can withstand a trade war with China. Iowa, Missouri and Nebraska can’t. That’s going to be politically devastating for the GOP. Very few serious politicians in South America bash China for obvious reasons. No economy that exports agricultural commodities can have a trade war with China.

    2-) Outsourcing to China allows American companies to remain competitive against the likes of Samsung and Xiaomi. If Apple and Dell could not outsource their production to China they could not compete with Asians companies in general.

    In the 80’s, when there was far less outsourcing to China, people bought Japanese TVs. That’s why you can’t win a trade war with China.

    3-) In fact, specially with more expensive complex goods, nothing is done entirely on China. Even a chinese smartphone has components from everywhere.

    4-) Chinese supply chain for electronics is pretty efficient, that’s why electronics in general are so cheap when compared to electronics in the 60’s when everything had a “Made in America” stamp.

    5-) The United States is not the only country in the world. Huawei is basically forbidden from doing business in the United States and it’s one of the largest telecommunications companies in the world. Very few Americans own Xiaomi smartphones, and Xiaomi and Huawai are the two largest manufacturers of smartphones in the world.

    There is very little that you can do with tariffs alone, and that would make everything more expensive. That’s basically what happened in Latin America, specially in Brazil, Argentina and Mexico before NAFTA.

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  12. Matt says:

    @Andre Kenji de Sousa:

    2-) Outsourcing to China allows American companies to remain competitive against the likes of Samsung and Xiaomi. If Apple and Dell could not outsource their production to China they could not compete with Asians companies in general.

    A WIDE variety of electronics are built in Taiwan (including major smart phones). Japan still produces competitive electronic products. The US even has some electronics being built there that are competitive. China has a deep supply chain advantage but if we as a country got serious about this stuff that advantage wouldn’t last.

    4-) Chinese supply chain for electronics is pretty efficient, that’s why electronics in general are so cheap when compared to electronics in the 60’s when everything had a “Made in America” stamp.

    That statement is incredibly wrong. What has made electronics so cheap was a combination of factors. I’m working on upgrading my electrical engineering degree and I have worked on electronics equipment for 26 years now. So I’ve watched some of this occur in real time and I’ve worked on many an old piece. I’m a vintage electronics fan with interests mostly in receivers/amplifiers/speakers. Basically the production of and listening to of music.

    Material sciences have advanced greatly since the 60s allowing manufacturers to be FAR more efficient with material usage. By better understanding a material you can use less of it and still maintain a safety margin. That’s why in old (+100 yr) houses you’ll see joists that are oversized (old growth wood is denser/stronger) and/or closer together than you would see in a newer house (YMMV as some cheaped back in the day too). Another example would be the development of a cheap to make material that does the job essentially as well as a much higher priced material.

    Massive improvements in components such as transistors, diodes, resistors etc. You can do more with less AND save money because manufacturing processes have improved too. PCBs are thinner and tighter traced than ever allowing for more savings.

    Those are just a few examples off the top of my head. There have been a lot of advancements in the electronics field in the last 58 years.

    I have been working on two old pioneer receivers a SX-3600 and a SX-980 (replacing some worn components). IF you look up their specs you’ll see they outperform modern receivers that are vastly more expensive. Blind tests with multiple people have confirmed the spec difference and that little extra bit that you can only really hear when blindly comparing receivers on the same loop. There are many other manufacturers who produced excellent receivers prior to the 80s. The accepted standard for performance on low budget receivers in that era was vastly higher than today. In the 80s everyone went to plastic and cheap so by the mid 80s there’s very little good in the way of receivers. In return for the massive loss in performance and reliability the consumer got cheaper prices. If you want I can go into details. It’s basically stuff like how they stopped using beefy awesome transformers because they found out they could slap in cheaper built smaller transformers and profit a bit more. The consumer is using cheap crappy speakers anyway so they won’t know. It also helped that HD anything basically wouldn’t be a thing for another 20 years.

    5-) The United States is not the only country in the world. Huawei is basically forbidden from doing business in the United States and it’s one of the largest telecommunications companies in the world. Very few Americans own Xiaomi smartphones, and Xiaomi and Huawai are the two largest manufacturers of smartphones in the world.

    About 7 years ago a coworker said her phone was a huawei which made me go “wut?”. I pretty much dismissed it as some unknown cheap Chinese phone. I’ve seen several since so I know some people in the USA are using them. I did feel kind of stupid once I actually spent some time checking out the company (SPOILER : it’s huge).

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