Donald Trumps new China trade war threat should make us all nervous

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Those arguments are supported by almost every serious analysis of the impact of tariffs, the cost of which is largely accepted by US companies and their consumers. There are estimates that the tariffs, and China’s retaliatory tariffs, will cost American companies and consumers more than $US160 billion.

The Cato Institute has, for example, calculated the cost to the US apparel and furniture industry alone at more than $US1 billion per year.

Global trade tensions with China have eased with Trump out of office, but that could change quickly if he is elected back to the White House.Credit:AP

The US Congressional Budget Office (in 2020) puts the cost at $US1277 per US household and other studies put the cost on economic growth at about one percentage point a year.

None of the studies showed any net benefit from the tariffs.

If the purpose of the tariffs is to reduce America’s trade deficit with China, they are not working either. Last year’s deficit was slightly larger than in 2017, before Trump began his trade war, although China represents a smaller proportion of total US imports than it did then.

The trade truce Trump made in 2020 was also a fizzer. Under the phase one deal, which avoided the threat of more and higher tariffs, China agreed to buy $US200 billion more in US goods over the next two years than in 2017. No it did, tracking below its pre-pandemic promises.

America First lags the rest of the world.

The tariffs, imposed in four waves between 2018 and 2020 with duty rates up to 25 percent and an average rate of about 20 percent, were left in place by the Biden administration, although it increased the number of exceptions from them. .

While the administration continues to scrutinize them and acknowledges their negative impact on the US economy, it sees them as leverage on a broader range of economic and geopolitical tensions with China.

Their departure will slightly lower the US inflation rate but there are also domestic political considerations. Action against China, however ineffective, is popular in the US and not just among Trumps MAGA supporters or Republicans more broadly. This may have influenced Trump to go bigger and harder in his new presidential campaign.

Many studies have shown that Trump’s tariffs on China have a negative impact on the US economy. Credit: Bloomberg

In May of last year, the USTR invited submissions from parties that wanted to keep the tariffs in place and received several hundred. Without those submissions, the tariffs will hit their four-year anniversary and expire.

It subsequently opened the review to wider feedback, which generated around 1500 submissions. Most of them are opposed to maintaining the tariffs, or want the range of products covered by them to be greatly reduced.

The USTR’s analysis is the effectiveness of tariffs in eliminating or countering China’s actions, policies and practices related to the transfer of technology, intellectual property and innovation and their impact on the US economy, including US consumers.

The simple conclusion to the review questions is that they have proven ineffective in changing China’s actions and policies and that they have caused significant damage to the US economy and consumers.

There could be a final decision this year on the cases before the Court of International Trade, which revolve around whether the Trump administration has met its legal obligation to consult the public and assess the effects of its actions on the economy. (The USTR, the defendant in the case, argued that it was only following the president’s orders). It will be open for either party to appeal, which is likely regardless of the outcome.

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The USTR’s own review is open to public submissions until May this year but the practical reality is that the White House, whether it houses Biden, a re-elected Trump or another Democrat or Republican, will ultimately decide if the trade war is maintained. including China.

Under Biden’s new trade sanctions and many of them are targeted at protecting areas of the US economy that are economically or militarily strategic, with actions designed to build America’s capacities and reduce the Chinese. Advanced semiconductors (computer chips) are a good example.

China is not the only one that should be nervous about the prospect of Trump’s return, a prospect that should be taken seriously given the strength of his hold on the Republican base, and the re-escalation of his trade wars.

The Europeans, Japanese and South Koreans, where trade tensions have eased under Biden, will be deeply concerned that Trump’s broader trade agenda will once again include their exports. America First lags the rest of the world.

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