Trade tensions: China, US dispute over tariffs grows
Monday, April 09, 2018
With $50 billion in tariffs already on the way, President Donald Trump on April 5 directed the U.S Trade Representative to explore placing an additional $100 billion of tariffs on Chinese goods entering the U.S. The threat of higher prices on Chinese exports to the U.S. (and the expected retaliation from China) shook financial markets on Thursday and Friday.
"President Xi and I will always be friends, no matter what happens with our dispute on trade," Trump wrote on Twitter Sunday morning. "China will take down its Trade Barriers because it is the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property. Great future for both countries!"
President Xi and I will always be friends, no matter what happens with our dispute on trade. China will take down its Trade Barriers because it is the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property. Great future for both countries!— Donald J. Trump (@realDonaldTrump) April 8, 2018
The president's latest move on imports from China dovetails with his March 1 levying of tariffs — 10 percent on aluminum and 25 percent on steel — entering the U.S. That change would likely hike the sticker prices of autos manufactured stateside with foreign-made aluminum and steel.
Trump took to Twitter Monday morning, focusing on the auto trade between China and the U.S.: "When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE - going on for years!"
When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE - going on for years!— Donald J. Trump (@realDonaldTrump) April 9, 2018
Last week, China levied tariffs of 15 percent to 25 percent totaling $3 billion on 120 U.S. imports, such as agricultural goods from California, Iowa and Washington, and threatened further duties on $50 billion of American imports. Meanwhile, Trump is making farmers in both blue and red states fret that China's vow to "counterattack with great strength" will raise the prices of U.S. agricultural exports that Chinese businesses and consumers purchase.
"U.S. exports of agricultural products to China totaled $21 billion in 2016, our second-largest agricultural export market," according to the federal Commerce Department. "Leading export categories include: soybeans ($1 billion), coarse grains (ex. corn) ($1.0 billion), hides and skins ($949 million), pork and pork products ($713 million) and cotton ($553 million)."
China has been the engine of global economic growth since its 1978 market reforms, according to the World Bank. Further, China is the U.S.'s biggest trading partner. Trade imbalances between the two nations do not exist in a vacuum, a critic notes.
"President Trump's escalating tariff battle with China will do little to end the large U.S. trade deficit or decades-long decline in living and working conditions experienced by many workers," according to Martin Hart-Landsberg, a professor emeritus of economics at Lewis and Clark College in Portland, Oregon.
The U.S. trade deficit with China was $385 billion in 2016, the Commerce Dept. reported. Crucially, the U.S. covers that trade deficit with China by borrowing, e.g., spending based on lending.
What lies ahead as trade tensions rise between China and the U.S., amid threats and counter-threats to impose tariffs?
"President Trump's proposed tariffs are primarily a bargaining chip to strengthen the intellectual property rights and profits of leading U.S. firms in key industries such as pharmaceuticals and finance," Hart-Landsberg said.
Meanwhile, U.S. workers and the firms that employ them have much skin in this high-stakes game of tariffs and trade brinkmanship.
According to the U.S. Department of Commerce, U.S. exports of goods and services to China "supported an estimated 911,000 jobs in 2015 (latest data available) (601,000 supported by goods exports and 309,000 supported by services exports)."
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