It's on: US, China tariffs take effect in new trade war

Is it Smoot-Hawley II, or an economic liberation? Both the US and China imposed punitive tariffs on each other’s exports today in what Beijing calls “the biggest trade war in economic history.” After a good jobs report this morning, the battle for market access and intellectual-property protection threatens to darken the economy just ahead of the midterm elections:


The United States and China hiked tariffs Friday on billions of dollars of each other’s goods, launching what Beijing called the “biggest trade war in economic history” in a spiraling dispute over technology. …

Washington imposed 25 percent duties on $34 billion of imports from China in the first in a possible series of increases that President Donald Trump says could affect up to $550 billion of Chinese goods.

The Chinese Foreign Ministry said “retaliatory tariffs” took effect. The Communist Party newspaper People’s Daily said they were imposed on a $34 billion list of goods issued last month that included soybeans, pork and electric vehicles.

The Trump administration has already threatened to raise the stakes. China has responded by accusing the White House of being “hoodlums”:

The official China Daily newspaper accused the Trump administration of “behaving like a gang of hoodlums.” It said they would damage the global economy unless other countries stop them. “There should be no doubting Beijing’s resolve,” the newspaper said.

Trump got some backup today for his side of the war from the Commerce Department, at least for rhetorical ammunition:

The U.S. goods trade deficit with China increased significantly in May, a Commerce Department report showed on Friday, as the United States and China lunged into a tit-for-tat trade war ignited by President Donald Trump.

The monthly goods trade deficit with the world’s second-largest economy widened to $33.2 billion, from $28 billion in April, the report said. The cumulative goods trade deficit with China through the first five months of the year totaled $152.2 billion, compared with $138.5 billion in the same period last year. …

The overall monthly U.S. goods and services trade deficit declined to $43.1 billion in May, from $46.1 billion in April. However, for the first five months of the year, it totaled $245 billion, up from $227 billion in the same period in 2017.


Trump argues that the deficit with China is a problem that has to get resolved now rather than later. Surprisingly, the people taking the brunt of the economic hit still largely agree with him, NBC News reports, but how long will that last?

Many of the farmers interviewed on their properties voted for Trump. Others may not have voted for him but did not vote for Hillary Clinton, opting to write in third-party candidates or leave that part of the ballot blank.

Despite the pressures, farmers here in the Midwest are holding on in the hope that the president’s tactics will get them a fair trade deal, one in which countries aren’t slapping American goods with high tariffs while being allowed to freely import into our market.

But if the trade war continues into the spring of 2019, the owners of thousands of smaller farms, many handed down from generation to generation, could face tough decisions, pitting their pocketbooks against the president’s policies. …

Other farmers also say they still trust the president. They’re glad someone is talking about trade. And while it’s not how they would do business, they believe he will get the job done. If he has to ruffle a few feathers in the Washington “cesspool” along the way, that suits them just fine.

“We’re getting tariffed to death,” said Scott Ditter, a dairy farmer in Sheboygan Falls, Wisconsin, referring to Canada’s 270 percent duty on American milk.


That may well be true, but it’s about to be true for the rest of American consumers too. Prices are about to go up on numerous import items, which will make clear that tariffs are actually — ta da! — taxes on domestic consumers rather than on foreign exporters. And where prices don’t rise, they may actually collapse when the production that was meant for export ends up getting dumped in the domestic economy instead.

However, it’s important to remember that there are national security and intellectual property issues at the heart of this dispute — with China, anyway. Beijing is pushing for its China Made 2025 project, the strategy for which involves stealing as much intellectual property as possible, including in telecom and defense industries. The Trump administration wants China to back off from its industrial espionage and is willing to trade some blows in the short run to succeed.

That strategy can only last so long, though. Once the trade war starts eroding Trump’s economic gains, he and the GOP will lose the political traction they need to remain in control of Congress. The populism fueled in part by trade issues can turn quickly back on Trump if he doesn’t score a quick win … or at least a deal he can sell as one.

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