Trump Fine With Letting His Foolish Trade War Continue Past 2020 Election

President Trump said this morning that he's fine with letting his trade war with the rest of the world continue all the way to the 2020 election.

In early morning remarks that sent the financial markets into a tailspin, President Trump said today that he’d be willing to wait until after the 2020 election to strike a trade deal with China:

LONDON — President Trump signaled on Tuesday that he was in no rush to end a long trade war with China, suggesting that he could wait until after the 2020 presidential election to strike a deal and sending stock prices tumbling.

“I have no deadline,” Mr. Trump told reporters during a wide-ranging 52-minute appearance in London with Jens Stoltenberg, the NATO Secretary General. “In some ways I like the idea of waiting until after the election for the China deal.”

He added: “But they want to make a deal now, and we’ll see whether or not the deal’s going to be right, it’s got to be right.”

Mr. Trump’s comments rattled European stock markets and sent the Dow Jones industrial average down 400 points by 10 a.m. They cast more uncertainty on an agreement he said he had made weeks ago with China’s top trade envoy, Vice Premier Liu He. They announced in mid-October that they had reached a so-called Phase 1 trade agreement that would allow Chinese purchases of American agricultural goods to resume while the United States would cancel additional tariffs scheduled for Oct. 15.

But completion of the Phase 1 deal has remained elusive, and the two sides have continued to grapple over terms as an important date quickly approaches. While Mr. Trump said Tuesday that he had no deadline, he has threatened to impose another round of tariffs on more than $100 billion worth of Chinese goods on Dec. 15.

Administration officials had previously suggested that those tariffs could be canceled if the two sides concluded a trade deal. But sticking points remain — including whether Mr. Trump will remove any of the tariffs already placed on $360 billion worth of products. If he proceeds with that December round, the United States would essentially be taxing every shoe, television and laptop that China sends into the United States and risking more retaliation.

The original plan called for an agreement to be signed in mid-November by Mr. Trump and Xi Jinping, China’s top leader, on the sidelines of the Asia-Pacific Economic Cooperation summit meeting in Santiago, Chile. But that meeting was canceled because of street protests over a subway fare increase in Santiago, and momentum on the trade talks has slowed since then.

The Trump administration insists that China must offer more concessions to protect intellectual property and open its markets to American companies, while China is demanding more relief from Mr. Trump’s tariffs in return for such concessions.

American and Chinese officials have remained fairly optimistic that a deal will be struck before the new tariffs take effect Dec. 15, but they say the final decision will fall to Mr. Trump and Mr. Xi.

(…)

The remarks followed several moves on Monday that renewed the president’s threats of a global trade war. The president announced on Twitter Monday morning that he would impose tariffs on metals from Brazil and Argentina. Later that day, his administration said it might place tariffs as high as 100 percent on $2.4 billion of French imports in response to a new French tax on American technology companies.
Those moves have reignited uncertainty in a global trade war that had appeared to be calming as the presidential election approaches. In the last several months, the Trump administration has announced a trade deal with Japanpostponed a decision to place devastating tariffs on European cars, and pushed for the ratification of its revised North American trade deal.

Many Wall Street analysts have expected the president to try to gain more bragging rights for the 2020 election by finalizing a trade pact with China by the end of the year. That timeline would also allow the administration to avoid the Dec. 15 tariff increase, which will raise the prices of smartphones and electronics and potentially anger voters.

But in his public remarks, Mr. Trump has frequently said that he is happy to further raise American tariffs, which are already at their highest point in decades. He has repeatedly welcomed the contributions of the tariffs to the government’s coffers, and erroneously claimed that the levies are having no impact on American businesses.

It’s possible, of course that these latest remarks could be Trump’s way of playing chicken with the Chinese in advance of a deal to avert the imposition of the widespread tariffs on virtually everything imported from China that he announced over the summer and later delayed until mid-December so as not to interfere with the holiday shopping season. That isn’t how Wall Street is taking the comments, though.

As I write this, the markets are down by more than 1.5% across the board, with the Dow Jones Industrial average leading the way by being down more than 400 points. Admittedly, this is after a week last week where market indices hit record highs, but the link between market performance and Trump’s idiotic trade war cannot be denied. Before Trump spoke this morning, market futures for the Dow, S&P 500, and NASDAQ were all strongly positive. Within mere minutes after he finished talking trade, though, those futures turned negative to the point where the Dow opened down 300 points and kept plunging after that. This was after a day yesterday when the markets were down by roughly 200 points due to the bad manufacturing report I wrote about this morning.

We’re basically at the point now where repeating the arguments against what the President is doing here is becoming redundant. Anyone who has taken a basic economics education knows that tariffs are, generally speaking, a bad idea because they end up causing more harm to the economy of the nation imposing the sanctions. We’ve seen plenty of evidence of this is the eighteen months since President Trump began this trade war with the imposition of tariffs on steel and aluminum that had the impact of increasing the domestic cost of those products, raising prices for manufacturers that rely on these raw materials, and eventually raising prices for consumers who buy everything from washing machines and dryers to automobiles. From there, the war expanded in a tit-for-tat manner that we’ve become used to at this point and has been shown to have a measurable impact on the economies of both the United States and China. Despite that, both nations appear locked in battle at this point and efforts to reach a resolution have been utterly unsuccessful.\

All of this is happening at the same time economic analysts are warning that Trump’s trade war could push the world economy into recession. This is one of the factors that the Federal Reserve Board cited in its recent decision to cut interest rates, a policy it said it may continue if there is further evidence that the trade war is harming the economy. While President Trump has claimed, against all of the available evidence, that it is China and other targeted countries that are paying the tariffs that he has imposed, the reality is that the tariffs are paid by importers who pass them on to their American customers who then pass them on to American consumers. Indeed, Trump himself seemed to acknowledge this when he delayed the implementation of tariffs on consumer goods imported into the United States until nearly the end of the holiday shopping season. Originally, of course, those tariffs were supposed to go into effect on September 1st. Obviously, if the President really believed that a trade war was costless to the economy and American consumers, he would not have made a decision like this. That delay is set to expire on December 15th. If the U.S. and China are unable to reach a deal before then, then the impact on financial markets, the American economy, and the pocketbook of the average American could be quick severe.

The President is fond of saying that  “trade wars are good and easy to win,” As we’ve seen, the fact is that they are bad and everyone loses. As I’ve noted in the past, the arguments that these tariffs help either American industry or the American economy are nonsense. In the end, higher tariffs end up being paid by American consumers, by American businesses that depend on international trade such as the agriculture industry, and by the businesses that rely on the products that are subject to the tariffs. President Trump’s arguments to the contrary notwithstanding, there is no economic benefit at all to tariffs and a heck of a lot of negative. Despite that, the Trump Administration appears committed to this ill-advised, self-destructive policy

The irony of all of this, of course, is that it may end up being the President’s own obsession with tariffs that causes the economic downturn prior to the 2020 election that he obviously fears. As it is, those policies have already helped to send the manufacturing sector into a recession and it could be a very short period of time until it drags the rest of the economy with it. This is especially true since several top nations in Europe already seem to be headed toward recession and China’s own growth is slowing down as it too feels the impact of the trade war. While the U.S. economy is obviously stronger than some of these other economies, we can’t shield ourselves from what’s happening in the rest of the world forever. And as I’ve said repeatedly, it is inevitable that the current period of economic expansion, which is clearly slowing down, will come to end. If that’s what happens, then he will likely get what he deserves at the ballot box. But it will be the rest of us who end up paying the price for it.

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. Daryl and his brother Darryl says:

    He’s fine letting them go…because he doesn’t know how to end them.
    NAFTA2.0 does almost nothing that NAFTA and the TPP didn’t already do.
    If he tries to pull that again with China, after a $28B bailout of farmers, I don’t think it will go down nearly as well.
    Xi is playing him like a piano. The same as Kim and Putin and Erdogan play him like a piano.

  2. Kari Q says:

    He seems to believe that every deal means someone is screwed. Since China isn’t begging for a deal, he thinks that means we’re the ones being screwed. The possibility of a deal that is good for both parties never occurs to him.

  3. Michael Reynolds says:

    I’m not enough of a China watcher to know what Beijing is thinking about all this. They have the issue of Hong Kong on their plates and they can accuse the protesters of being American stooges. They have declining growth rates, a population slipping below replacement, the continuing poverty of most of the country in contrast to the wealthier coastal cities. They’ve got problems and big ambitions.

    My guess is Xi will play the patriotism card – works re: Hong Kong, works re: the US. That would make a deal harder as Xi can’t be seen to kowtow.

  4. Gustopher says:

    Anyone who has taken a basic economics education knows that tariffs are, generally speaking, a bad idea because they end up causing more harm to the economy of the nation imposing the sanctions.

    That really depends on what one is hoping to get out of the tariffs, and whether you end up creating a safe harbor in Vietnam due to your trade war with China. Right now, Trump is Making Vietnam Great Again.

    Tying tariffs to worker wages, worker rights, environmental protections and the like could actually be a fine tool, if done across the board. Part of the benefit is exporting our values, which may be worth mildly higher prices on iPhones and t-shirts.

    A strong middle class in Mexico would do more for securing our southern border than the fence would.

  5. DrDaveT says:

    @Gustopher:

    Part of the benefit is exporting our values, which may be worth mildly higher prices on iPhones and t-shirts.

    Now that @andros has explained to me what our values actually are, I don’t want to export them.

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  6. inhumans99 says:

    So he is kicking the can down the road, figuring that if he is not re-elected it is someone else’s headache to continue the tariffs or end them. It is telling that he does not automatically assume he will be the person dealing with the headache.

  7. andros says:

    So some countries aren’t imposing unreasonable barriers on our exports? Thanks. Learn something here every day.

    The Chinese are well-positioned to play the long game. Biden’s idiotic blathering (since awkwardly retracted) about how China just isn’t a problem may well have encouraged the Chinese to wait and see if he gets elected, before getting serious about negotiation.

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  8. Michael Reynolds says:

    @andros:
    Lots of foreign countries do things we don’t like. We deal with it through diplomacy. (Look it up.) What we don’t do is start trade wars with peers. Sanctions, embargoes, tariffs etc work when we have disproportionate economic power. Say against South Africa. China is not South Africa.

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  9. mattbernius says:

    @andros:

    The Chinese are well-positioned to play the long game.

    This is correct, which is why it was foolish for Trump to constantly tease deals when the two parties remain far apart. The reality is he’s announcing this because it’s sinking in that it unlikely that he can get a deal before the election.

    Which gets to… I’m curious, what do you make of the fact that under Obama, the trade deficit trended more or less flat (taking account for monthly fluctuation and the 2008 crash) and under Trump’s trade war has trended up (i.e. significantly increased)?

    https://tradingeconomics.com/united-states/balance-of-trade

    Can you talk me through what you believe is working in Trump’s current strategy? So far it’s only exacerbated existing trade gaps. What wins does he have to show?

    Of course this is similar to a pattern we see in the overall debt too, which has significantly increased under Trump.

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  10. Kathy says:

    @andros:

    Apologies for feeding the troll.

    Are you saying a man who’s not even the Democratic nominee for president wields more influence in foreign policy than the Stable Genius of Unmatched Wisdom you call Trump?

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  11. Daryl and his brother Darryl says:

    @andros:

    So some countries aren’t imposing unreasonable barriers on our exports?

    No ones said that.
    The Chinese are indeed a problem.
    Tarriffs are not the way to deal with them.
    Only Trump and his Cult think they are.

  12. andros says:

    @mattbernius:
    Neither of us has any way of knowing whether the ultimate result will justify these temporary discombobulations. Not to offend, but I here place more faith in Trump’s judgment than yours. And with unemployment remaining near record lows, I see no reason for hyperventilation.

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  13. Lounsbury says:

    When the other team has a striker who seems particularly talented at scoring own-goals, don’t get in his way.

    A visible recession in mid 2020 in time to hit the November polls is just what the Doctor ordered to cure Trumpitist.

  14. mattbernius says:

    @andros:

    Not to offend, but I here place more faith in Trump’s judgment than yours.

    But what is that faith based upon? I mean I get not trusting me… I’m some dude on the internet. What I don’t get is where Trump has ever delivered in any area that suggests he (or his team) know what they are doing?

    Beyond getting judges in place and slashing regulations (both easy given the powers of his office and the conditions of the Senate) what actual evidence can you point to of foreign policy successes? Has he delivered on any major foreign policy or trade promise to date?

    I’m asking to understand if I’ve missed something…

    Also, I’m genuinely curious about what it would take for you to lose faith and say “you know what, this *isn’t* working.”

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  15. drj says:

    @Daryl and his brother Darryl:

    The Chinese are indeed a problem.
    Tarriffs are not the way to deal with them.

    Actually, targeted tariffs may be a suitable tool to deal with Chinese IP theft and other issues.

    Especially if the US would have entered that fight together with allies.

    But Trump withdrew from the TTP, pissed off the Euros with needless tariffs on steel of all things (like the US should become a world leader in semi-manufactured goods rather than high tech products), and even picked silly fights with Canada and Mexico that cost a shitload of goodwill and delivered virtually nothing.

    So first Trump isolates the US from its natural allies with nothing to show for it; and only then decides to take on its foremost economic competitor by making impossible demands with no way for the Chinese to back down.

    It boggles the mind.

    If one were tasked to come up with a deliberate strategy to weaken the US, it would be hard to do much better than this.

    And another thing, people shouldn’t get hung up on trade deficits.

    If your currency is the world’s foremost reserve currency, trade deficits are: a) to be expected; b) not a problem. Because if foreigners want dollars, but you don’t want their currency, what else can they offer but their goods?

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  16. Daryl and his brother Darryl says:

    @drj:
    Yes…it was foolish to walk away form the TTP…especially when NAFTA 2.0 essentially embraced much of it…without the part that addressed China.

  17. Daryl and his brother Darryl says:

    @andros:

    Not to offend, but I here place more faith in Trump’s judgment than yours.

    ROTFLMAO…He went bankrupt 6 times. He lost money running Casinos. Fuqing Casinos…where the house always wins.
    It cracks me up…the completely unwarranted faith the Cult shows in their God.

  18. mattbernius says:

    @mattbernius:

    Beyond getting judges in place and slashing regulations (both easy given the powers of his office and the conditions of the Senate) what actual evidence can you point to of foreign policy successes? Has he delivered on any major foreign policy or trade promise to date?

    On reflection, I should have stated, a foreign policy success/promise kept that doesn’t involve *leaving* an agreement or a change in military strategy.

    To be more exact, can you point to any successful major negotiation? There’s the limited Japan deal and, if it makes it through congress, the revisions to NAFTA. That’s all I can think of. Or am I missing something?

  19. Michael Reynolds says:

    @andros:
    By any objective standard I’m a better businessman than Trump. He went bankrupt six times. I never have. He’s desperate to hide his finances. I’m not. He got 400 million from his crooked father. I got zip. Graph his percentage rise in wealth and mine and my graph is way better.

    But I’m hardly unique in this. JK Rowling had nothing, now she’s a billionaire. So she is way, way better at making money than me or Trump. And she didn’t have to go bankrupt even once, or cop a plea to money-laundering, or have her associates lining up for federal prison.

    Frankly a Chihuahua could turn 400 million into a billion. Without even having to blow Vladimir Putin for a bail-out. (FYI, I have never blown Putin, and I don’t believe Ms. Rowling has, either.)

    It’s one of the funniest things about you people. You worship a con man and he’s not even a good con man.

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  20. DrDaveT says:

    @Michael Reynolds:

    And [Rowling] didn’t have to go bankrupt even once, or cop a plea to money-laundering, or have her associates lining up for federal prison.

    But she did have to go on the dole… which is exactly what the dole is for. The taxes she has paid since dwarf the benefits she got. Safety nets benefit everyone.

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  21. An Interested Party says:

    So he is kicking the can down the road, figuring that if he is not re-elected it is someone else’s headache to continue the tariffs or end them.

    In other words, he’s following the GOP playbook that’s been going on for years…in the past few decades, the pattern is that a Republican president screws so much up and it is left to the Democratic president who follows him to clean up his mess…

    But she did have to go on the dole… which is exactly what the dole is for. The taxes she has paid since dwarf the benefits she got. Safety nets benefit everyone.

    That only works in socialist hellholes like the UK…here in bootstrapping America, such things are not possible…

  22. Michael Reynolds says:

    @DrDaveT:
    Yeah, I think it’s a safe bet that the British Treasury have turned a tidy profit on Ms. R.

    Meanwhile the GOP uses dummy purchases to boost their cult leader’s idiot son onto the bestseller list. I realize this is a bit close to the bone for me, but I can’t tell you what contempt I have for some ghost-written vanity project taking a spot away from an actual author. I still remember my editor calling me (I was in a bar in Cincinnati) to tell me I’d hit the NYT list. It’s one of those things you get to wear around the rest of your life: New York Times Bestselling Author. We work and compete for that and this worthless little daddy’s boy buys his way on for work I doubt he even read. The Trump Crime Family’s own A.J. Soprano.

  23. grumpy realist says:

    @andros: But WHY do you place any trust or faith in Donald Trump?!

    That’s what causes me to scratch my head. We’ve got a guy who can’t keep himself out of bankruptcy court, who has ended up in tons of lawsuits because of his never coming through on contracts, who has lied and cheated his entire life, can’t be faithful to any of his wives: and you still think that this guy is a “great president”, gullibly believing in all of his promises that he has made. (Yes, and how many of those has he in fact lived up to?)

    You’re acting more like a battered wife going back to an abuser than anything else. “Enabler” is a good word as well.

  24. KM says:

    @grumpy realist:

    You’re acting more like a battered wife going back to an abuser than anything else.

    There’s a reason most political grifters leans towards the conservative/ authoritarian side of the fence – gaslighting, manipulation, emotional abuse and trapping people into the sunk cost fallacy are hallmarks of both styles. A good conman knows how to make the mark not only fall for it but be so invested that even realizing how screwed they are doesn’t provide enough incentive to make the con stop. Pride’s a hell of a drug, one more people are on then they want to admit. Healthy self-esteem is one thing but far too many in this world have an allergic reaction to the words “I was wrong” and “I need to change”

    It’s really hard to admit that you screwed up, that your life is hellish because of a choice you made and that you are going to have to make even harder choices and endure more misery to get away with no promise it will get better. It’s just easier to go along, crawl back to the scammer and give them more money then admit you got conned in the first place. Change means admitting you weren’t able to see through the scam (may or many not be your fault) and that you were targeted for a reason (something about you made you likely to fall for it). Self-reflection is apparently more terrifying then loosing your life savings, your dignity, your way of life and possibly the democratic system we’ve held onto for 2 centuries.