The Trump Administration’s deepening tariffs on China is a concern for many, particularly in the Midwest. The question is: Will the tariffs on China eventually help or hurt the U.S. economy in the long term.
The U.S. imported $505 billion worth of products from China in 2017, while China imported $129.9 billion worth of goods in return. Numerous studies have concluded that China is benefiting in the trading game because it can make products at a far cheaper cost because of low worker salaries, limited environmental protections and virtually nonexistent labor laws.
The administration escalated his trade war with Beijing last week, saying the United States would impose tariffs on $200 billion worth of goods. The deepening trade war comes on top of the $50 billion worth of goods already taxed earlier this year, meaning nearly half of all Chinese imports will face levies. The administration said it was prepared to tax all Chinese imports.
According to U.S. Secretary of Commerce Wilbur Ross, the goal of the tariffs is to level the playing field, saying they are stealing Americans’ intellectual property. He says Chinese firms demand that technology transfers be thrown into trade agreements with U.S. companies.
MarketWatch, a financial news organization, reported the the U.S. trading deficit with China last year was a whopping $375.2 billion in 2017, with computers and electronics accounting for nearly 45 percent ($167.3 billion) of the total deficit. On the other hand, one of the areas where the U.S. has seen a surplus with China is in the trading of farm crops. China imported $15.3 billion more in farm crops than the U.S. did from China in 2017. Perhaps that’s one of the reasons that Trump chose former Iowa Gov. Terry Branstad to become ambassador to China.
But guess how the Chinese retaliated? They in turn levied tariffs on agricultural staples like soybeans.
According to investment broker Charles Schwab, the tariffs likely will result in higher prices for cellphones and other electronics. Trade disputes, according to Schwab, are the least-partisan issue on Capitol Hill: If the largest employer in your district is affected, it’s going to change voters’ opinion on the issue.
And farmers are getting hit, too. What will be interesting to see is whether loses the overwhelming support that he gained from farmers during the 2016 Election. When the White House realized that the trade war was going to hurt many farmers in the pocketbook, the administration quickly pursued $12 billion in subsidies to help offset farmers’ potential losses.
The fear is that a harsh stance toward not just China, but Canada and the European Union as well, eventually will erode some of the long-standing trading arrangements that could hurt farmers in the long run. Let’s hope we don’t chuck the whole economic system into the Pacific Ocean.