Resolving the US-China trade war
It’s crucial, but little is being done
It’s not very encouraging news, given further reporting that Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He are “look[ing] for ways to reengage” and that the “timetable, the issues to be discussed and the format for talks aren’t finalized…”
My advice: Don’t try, just do it.
The US-China trade war is no longer a possibility, it’s on. The US has imposed tariffs on massive volumes of Chinese imports, and the Chinese have retaliated in kind, hitting US agricultural products, among other things. The Chinese have indicated they will match further US tariffs, and they are in the offing, measure for measure.
Frankly, the situation does not present much cause for optimism. For one thing, the United States administration is not speaking with one voice. Mnuchin has been pushing for a deal with China while US Trade Representative Robert Lighthizer is been taking a harder position.
The president himself, although not surprisingly, also appears to be of two minds. The latest round of talks between the two sides on May, they issued a joint statement vowing to reduce the US trade deficit with China, but Trump himself backed away from the deal a few days later. Then Trump imposed tariffs on $34 billion in Chinese imports in July, the talks broke down, the Chinese disavowed any commitments they previously made, and they imposed fresh tariffs on US exports.
Meanwhile, Trump floated the possibility that he will slap tariffs on all Chinese imports. In an interview with CNBC, he compared such a move to “playing with the bank’s money.”
But a recent report from the Peterson Institute for International Economics points out, “While Trump may think he is playing with the bank’s money, he is gambling with American families’ jobs, incomes, and livelihoods.”
Imposing tariffs on all Chinese imports would hit consumer goods like smartphones, laptops, televisions, clothing, and footwear. Trump’s tariffs have also hurt the competitiveness of US companies, raised costs for manufacturers that use steel and aluminum, and retaliation by Canada, the European Union, China, have hurt US sales in foreign markets. Trump also floated the notion of bailing out US farmers whose exports have plummeted, an idea that went over like a lead balloon.
As the PIIE report concludes: the damage “will continue to rise unless President Trump finds a way to resolve his trade war.”
US goods deficit with China—no end in sight