What is Trump’s trade war strategy?
Much like U.S. Sen John Cornyn, we, too, would like to know how the U.S.-China trade war story ends. Texas, the nation’s leading export market to China, has a lot on the line in these talks.
A favorable outcome for the U.S. would include ending these tit-for-tat tariffs, stopping the practice of forcing U.S. companies doing business in China to share technology, cracking down on counterfeiting and espionage, and opening markets for U.S. agriculture exports. If President Donald Trump can achieve those goals, it would be an enormous win for the president and the global economy.
But the problems are his strategy is clear as mud, there is no outcome in sight, and the president is ratcheting up tariffs rather than eliminating them — and, contrary to what the president is saying, consumers pay these costs.
A prolonged trade war serves no one. Tariffs hurt U.S. consumers and manufacturers because they raise the prices for imported goods. A tariff on imports is a tax we pay. Chinese retaliation raises prices on American exports and is a tax Chinese consumers pay, but it also potentially closes off a key market for our exporters. The only winners in such a trade war are the countries that make competing products and are not subject to such tariffs.
A better approach would have rallied allies also affected by China’s espionage and counterfeiting to create international pressure for change. Alas, that never happened. We are where we are.
Because the U.S. and China are the two largest global economies, the repercussions of a protracted trade war are immense. Markets plunged after Trump announced he was upping a 10 percent tariff on many Chinese imports to 25 percent. China responded, and the president is considering additional tariffs. Analysts are concerned that slowing economic growth in both countries — the U.S. economy is strong, but China was already struggling — will have ripple effects in the global economy as consumption falters.
Meanwhile, U.S. farmers are once again clamoring for a bailout — and appear likely to get it — as they bear the brunt of Chinese tariffs, but they are not the only businesses struggling. Domestic manufacturers are seeing the costs of their products increase.
Through it all, Trump has been consistently inconsistent. At one point, Trump suggested a trade deal was imminent, but after talks fell apart, he ratcheted up the tariffs and suggested the trade war would be prolonged. And he has, at times, demonstrated a misunderstanding of tariffs, suggesting China pays for them, which is not accurate. Importers — and, in turn, U.S. consumers — pay for U.S. tariffs. And if the government pursues another bailout for farmers — but ignores the hit for other businesses such as manufacturers? — then taxpayers are also paying for this trade war.
All of this has left Republican lawmakers frustrated.
“I’m not sure if you talk to him face to face, he hears everything you say,” said Iowa Sen. Charles Grassley, according to the Washington Post.
That’s an extraordinary comment about the president of the United States from someone in his own party. Grassley has said he plans to pen a letter to the president on behalf of farmers, and there is talk about attaching a bailout to disaster relief funding. A bailout that could have been entirely avoided with better policy. Remember, the U.S. could have partnered with allies to create international pressure on China.
Perhaps Cornyn should send his own letter on behalf of Texas. The Lone Star State is the nation’s leading exporter, and producers here shipped more than $16 billion in goods to China in 2018. That’s greater than any other state, which is another way of saying Texas has a lot to lose in a protracted trade war with China.
A trade war can’t be won if there is no agreement.