Aleksandr George is a first year International Relations student at King’s College London and is also the North America editor at International Relations Today. This article discusses the contentions around the US-Sino trade war under POTUS Donald Trump.
Why the hard feelings toward China?
Before Trump even stepped foot into the Oval Office, it was clear how he felt about the United States’ biggest trading partner. On the campaign trail, he repeatedly expressed dissatisfaction with US-Sino trade relations, claiming on several occasions that China was ‘stealing’ American jobs . Once in office, Trump mostly surrounded himself with cabinet members and advisors who would affirm his view of the world. Among them, former Democrat and top economic advisor Peter Navarro stands out for his heterodox beliefs about economic policy. Despite joining Trump during his campaign in 2016, Navarro often found himself silenced by free-trade advocates on Trump’s economic advisory team; however, early 2018 marked a power-shift for Navarro when chief economic advisor Gary Cohn and staff secretary Rob Porter—an avid supporter of free-trade—left the administration . This allowed Navarro to affirm Trump’s long-standing mistrust of China and encourage his desires to be tougher on China.
With Navarro now being the busiest bee buzzing in Trump’s ear, it’s necessary to outline his views on trade with China. Not only does Navarro side with Trump’s claims that China engages unfairly with the United States in trade, but he also tends to take views commonly held by other economists to the extreme . Navarro encouraged Trump to threaten leaving NAFTA, impose tariffs on Mexico and Canada to force renegotiation on trade deals, and slap tariffs on Chinese imports wherever possible . Navarro harbours deep-seated—and largely unfounded—beliefs about Chinese trade policies and so-called aggression and deception, ardently advocating for permanent tariffs and trade barriers . Absent outspoken free-trade proponents in the White House, Navarro has free reign to greatly influence the trade policies of the United States without let or hindrance. He is the most influential of Trump’s economic advisors, yet economists on both the left and right find many of his beliefs about trade to be archaic, fallacious, and flat-out incorrect .
Getting tough on China
Tump’s heavy reliance on Navarro’s ‘expertise’ led the United States into a trade war with China last year. This came after a US investigation into Chinese intellectual property practices in 2017 . In September of last year, Washington enacted tariffs on Chinese imports totalling in the billions of dollars, followed by a proportionate Beijing response . In December, months of retaliatory action back and forth gave way to a suspension of the creation of new trade tariffs set to expire after 90 days . US tariffs have mainly been focused on industrial products, including electrical equipment, industrial furnaces, rail parts, navigational equipment, machinery for making plastic products, etc . Chinese tariffs, on the other hand, have been employed specifically to negatively impact Trump’s political base, including agricultural products and natural gas .
Getting tough on Americans—and the global economy
On balance, the Trump administration’s hostile engagement with China that led to the current trade war has had a negative impact on both Americans and the global economy as a whole.
After merely one month following its inception, the trade war demonstrated its capacity for economic devastation. The United States’ GDP dropped 1.78 points in October of last year—the worst hit to American GDP since 1985 . Furthermore, higher tariffs mean less overall trade between the United States and China, which led to shipping companies being forced to fire employees to compensate for lost revenue . In 2017, the United States exported 33 million tonnes of soybeans to China—or more than a third of all soybeans imported by China—meaning that Trump’s trade war negatively affected American farmers as well . Trump claimed that his protectionist policies—specifically those regarding Chinese steel—would help industry. But that’s not what happened. The tariffs on steel hurt the domestic steel industry more than they helped it. In fact, stock for steel-producers actually fell 22 percent as a result of Trump’s tariffs . For consumers, the impact has been less than expected; however, if a deal is not reached soon—meaning that tariffs on Chinese imports may more than double—American consumers will feel the impacts of Trump’s frivolous trade war with China .
Though I’d imagine that Trump is far more concerned with the domestic, the global economy hasn’t benefitted from the US-Sino trade war either. Roberto Azevedo, head of the World Trade Organisation, explained to the BBC that the world is facing a free-trade crisis worse than it has witnessed since 1947, citing the escalating trade war between the US and China as a major contributing factor .
Where do we go from here?
Given the gravity of the situation and further considering that the end of the 90-day freeze on creating new tariffs ended on March 1st, one must wonder where all of this is heading. At the Governor’s Ball last month, Trump claimed that progress had been made in negotiations between Washington and Beijing . Trump agreed to halt increases on further tariffs of Chinese products; however, this raises concerns in Congress from both the left and the right about what kind of deal he is willing to agree to . Political pundits have concerns for whether or not China will honour the agreement that is eventually reached and worry that Trump’s concerns with his image will lead to him accepting a shoddy deal for the sake of being able to say he negotiated a deal at all . But even if tariffs don’t increase greatly in the near future, it is unlikely that presently existing tariffs on China are going anywhere, anytime soon . Because of this, even if a trade deal were reached tomorrow, the slowing of the global economy caused by these high tariffs and non-cooperation between the US and China wouldn’t be reversed . And none of that even touches on the fact that Trump very well could derail the progress that’s already been made in searching for a peaceful resolution to the US-Sino trade war . With the volatility of the Trump administration, what comes next will surely surprise us all.
Picture of Donald Trump and Xi Jinping
Picture of Peter Navarro
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