PRESIDENT TRUMP’S TRADE war with China isn’t just about how much the next pair of running shoes will cost American consumers.
No, the signals are now clear. Its impact is spreading like a virus to all segments of the US economy, affecting the manufacturing supply chain, with the potential to whack consumer confidence. Economists fear that if the nation’s currently robust rate of consumption nose-dives, it might just be the tipping point for a recession.
But hey, won’t it be all worthwhile if it’s a “win” for the man in the White House, whose knowledge of trade policies has all the depth and breadth of his usual 280-character tweets?
There are, of course, serious trade issues with China that have gone unaddressed for years. American companies have grown weary of trying to protect their intellectual property from a Chinese government unwilling to enforce international law and all too willing to make technology transfers part of the price of doing business with Beijing.
But instead of tackling the real problem in grown-up negotiations, the president last Sunday responded by lowering the long-promised hammer of a 15 percent tariff on some $112 billion of Chinese goods. Unfortunately the tariffs will fall largely on such consumer staples as shoes and clothing along with televisions, smartwatches, and headphones. JPMorgan Chase analysts put the bill to the average American consumer at about $1,000 a year.
But, as they say on those TV infomercials, wait there’s more. The second round of tariffs threatened by Trump would kick in Dec. 15 — another 15 percent on another $160 billion of imports including, this time, cellphones, laptops, more clothing items, and toys. And that part of what passes for a Trump trade policy couldn’t come at a worse time for retailers now trying to plan for the upcoming holiday shopping season.
Will consumers buy more in anticipation of higher prices later? Or will they have already retrenched? There is no roadmap here.
If Trump’s move was designed to bring more manufacturing jobs back to the United States from China, well, that’s not exactly working out either. Many US companies whose supply chain passes through China are looking not just to escape tariffs but to lower their labor costs even more by moving operations to Vietnam, Bangladesh, or Indonesia.
Days after the tariffs officially went into effect, a major index of US manufacturing activity fell for the first time since 2016. The index, compiled by the Institute for Supply Management, found in its survey that the dip indeed reflected shrinking export orders and the difficulties of moving supply chains out of China.
Meanwhile, Beijing has responded in kind, imposing tariffs largely on US agricultural products like corn, soybeans, and pork, hurting the very farmers Trump so cynically courted in 2016. His $16 billion subsidy to impacted farmers doesn’t come close to making them whole.
Illinois farmer Allen Williams told CNBC that the subsidy covered about 8 percent of his gross receipts, but he added, “I don’t think it’s right for the American taxpayer to subsidize this segment of the economy just because of what I see as a mistake of a trade war.”
So the same American consumers who are going to be paying more for shoes, clothes, and all kinds of electronics are footing the bill for subsidies to farmers also feeling the pain of the trade war. How again is this helping?
Talks are scheduled to resume in October, and it’s time for this charade to end. There is no policy here — none at least worthy of the name. There is only the usual petulance of a president consumed with “winning” a trade war he started and now can’t find a way to exit.
But exit he must, before he sends the rest of the American economy into a downward spiral he won’t be able to stop.