Volume 6          Number 296    


President Trump had been going at it hot and heavy since the campaign wars of 2016, when he promised countless times that he would “cut a better deal with China, that helps American businesses and workers compete.” His goals were to cut our trade deficit and weaken China’s place in the world economy. After all, in his mind he was the master of cutting a deal. Hadn’t he written a best seller, “The Art of the Deal?” This was based on his almost 40 years in the business world, and never mind having to declare bankruptcy six times. This should be easy, right? All he had to do was slap some tariffs on China and a few other countries that he said had been taking advantage of us.

             trump and ping

Once in office, President Trump huffed and puffed for a couple of years about tariffs, and his associates went back and forth with a few countries to no avail. Finally, in early 2019 he stuck heavy tariffs on imports of aluminum and steel from China, Mexico and Canada. By the end of the year we had reached an agreement with Mexico and Canada and settled the metal tariff tussle as part of the creation of the new United States Mexico Canada (USMCA) Fair Trade Agreement. This supposedly replaced the North American Fair-Trade Agreement (NAFTA), which the president considered unfair. In the end, experts have figured out that, other than changing the name, the two agreements were about the same. But it gave the president an opportunity to say he had achieved a major tariff victory.

But China still had to be dealt with. It is true China had taken advantage of us. They had a history of tacking high tariffs onto imports from the United States, dumping, at low prices, goods they wanted to promote such as solar panels, and not paying royalties, thereby stealing intellectual properties such as films, books and CDs from the United States. The Obama administration had become more aggressive in their negotiations, but Trump meant to go “hardball.”

We began aggressive actions, until we were slapping tariffs for over $600 billion on just about everything coming into our country from China. The Chinese retaliated in kind and were particularly injuring our farmers that did lucrative exports to China. Very soon, United States farmers were screaming bloody murder. The president then gifted them with subsidies, a bail-out that grew to be about $30 billion, which goes against the very principles of tariffs.

 So, we paid out of our tax money $30 billion to farmers, plus the $55 billion in the form of tariffs that were paid to importers of goods from China. You know that the importers added this on to the price that we consumers paid for those goods. In all, since China’s retaliation then cut back on its imports of American goods, it is estimated that the whole deal cost us a whopping $200 billion, which includes the lost money of our vendors on being unable to export goods to China.

It was hoped that American manufacturers would pick up the slack from missing Chinese imports, but it looks like most of the tariffed categories were then outsourced to places like Vietnam, Taiwan, Mexico and Europe. Instead, our industrial production index experienced a year-on-year decline for the first time since 2015, in response to supply-chain interruptions and tariff-induced increases in production costs, according to the Carnegie Endowment for International Peace of June 24, 2020.

In January 2020, it looked that there was finally to be a U.S. China trade deal. As near as anyone could figure out, the deal restored the two countries’ relationship again to where it was pre-Trump. The tariffs on Chinese goods were partially relaxed, and, in turn, the Chinese gave us some concessions. Of course, president Trump declared victory, but it was a pyrrhic victory that cost our nation hundreds of billions. This agreement was only what was called Phase 1, with more to come. At best, it seemed to stop the destructive slide and more confrontation, put the brakes on higher tariffs and soothe the possibility of more destruction and uncertainty.

China had agreed to increase its American goods import by $200 billion over the next two years. This agreement was signed before the worldwide coronavirus hit, however, and the pandemic has had a tremendous negative impact on trade. China also agreed to more access for our goods and services. Lastly, they agreed to respect intellectual property rights and provide judicial access for companies to bring action if these property rights weren’t upheld.

The kicker is that this is essentially the same agreement that Premier XI signed off on with President Obama in 2015. China mostly disregarded that one, and It’s hard to believe, based on past history, that it will now follow this new agreement. Plus, who knows where international trade is going, during the coronavirus epidemic or in its aftermath, which will probably be felt for years?

It doesn’t help that the president has labelled the coronavirus as “China Virus,” because he needs a scapegoat in his presidential campaign for his failure to deal with this crisis. By labelling China in this vicious way, the president is helping to create an atmosphere of domestic racism as well as denigrating a whole country, which is not a good idea–to be riling our largest trading partner.

But the president has a way of oversimplifying problems, and either his experts failed to advise him or he just didn’t want to listen to what really was occurring on the world scene. He assumed that China was so dependent on American exports that they would buckle under the tariffs. He failed to note that China had been aggressively and successfully shifting from an export-driven economy to a consumer-driven one. More and more of Chinese manufacturing activity is targeted toward its own citizens and its own economy. So, the tariffs hurt China, but not that badly. What hurt more was losing the United States as an economic partner. The tariff trade war lasted just about two years and is considered to have caused waves, but not to have radically changed the trade balance with China.

And still, if one views the situation dispassionately over the years, our country has benefited from Chinese imports, which have provided our consumers with the lower-cost goods that stocked the shelves at Wal-Mart, Amazon, Target and the like. China has also increased investments in our country, which may or may not be considered an advantage, and provided a ready market for our farmers selling soybeans, feed. animal hides, alfalfa, hay, dairy products, and poultry. In 2017, 17 percent of our exports went to China, with imports from China accounting for a whopping 39 percent. In other words, we have been importing a lot more than we have been exporting with China.

To be judged a success, this trade war should have demonstrably aided the trade situation for us, going forward. There is no evidence of that. True, the supply chain now largely bypasses China, but it goes to places like Vietnam, and not home. And the American economy has fewer Chinese export dollars, fewer Chinese investments, fewer Chinese tourists, and fewer Chinese students.

The Chinese have diversified their investment globally, are no longer dependent on the U.S. Treasuries, and have worked harder at building a domestic economy. In the future we are less likely to have less leverage with a now adversarial country. We have declared victory in a war that shouldn’t have happened. To declare it a win is another one of the president’s 20,000 you know whats.

A good deal of president Trump’s appeal on the stump was the way he came up with simple solutions to complex problems. What people failed to recognize was that these problems weren’t solved that easily, and the nature of the problems kept changing. His solutions to the environment, immigration, health care, education, taxes, race, poverty, etc., are simple, as his mind is, and turn into one fiasco after another. So it is with the tariff dispute with China. His goals of reducing trade deficits and weakening China’s economic prospects have not come to pass. As a matter of fact, like everything else the president touches, it has turned to….s—t.

“A protective tariff is a typical conspiracy in restraint of trade.”

-Thorstein Veblen, American Economist.

……………………………………………….. …………………………………………………………….  . Please feel free to pass this essay on to others. If they wish let them e-mail me at stolzie@speakeasy.net; I will be glad to add them to the list of recipients. Also, if you have comments on this article or any others I would love to hear from you.



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