Will the trade war between the United States and China end anytime soon — and how?
President Trump remains adamant about holding China’s feet to the fire for practices that have taken advantage of the U.S. and pushed its trade deficit into the hundreds of billions of dollars. “This isn’t my trade war,” Trump said last week, blaming predecessors, both Democrat and Republican, for the current state of affairs. “This is a trade war that should have taken place a long time ago,” he said. “Somebody had to do it. So I’m taking on China on trade.”
Already the Trump administration has imposed 25% tariffs on about $250 billion in Chinese goods and the president says taxes will be slapped on remaining imports from China by mid-December. In retaliation, China put tariffs on about $110 billion in U.S. imports and recently announced a decision to no longer buy U.S. agricultural products.
Despite fears of the negative impact on American businesses and consumers, even Trump’s longtime antagonist, Senate minority leader Chuck Schumer, has backed the president on adding a 10% tariff on $300 billion of Chinese goods. Echoing what Trump has asserted for years even before winning the presidency, Schumer said China has not played fair and as a result “America has lost trillions of dollars and millions of jobs.” He said “being tough on China is the right way to be.”
Right or wrong, the trade war does have negative effects, but last week the president put the question in perspective, insisting he had to take on China, “whether it’s good for our country or bad for our country short term.” Trump again dismissed concerns about a recession and instead called for the Federal Reserve to lower interest rates. “We’re very far from a recession,” he told reporters. “In fact, if the Fed would do its job, I think we’d have a tremendous spurt of growth, a tremendous spurt.” At the same time, he said he was weighing tax policies that might stimulate fast growth, including a temporary payroll tax cut but he offered no concrete proposal.
The duration of the trade war will determine if it causes a recession, in the view of economists with the investment banking firm Morgan Stanley. They believe implementing current tariffs for four to five months would weaken global growth to between 2.8% and 3%, despite lower interest rates by central banks and, thus, a recession would ensue in three quarters. In any event, a recent survey showed that a majority of U.S. business economists expect a downturn for this country by the end of 2021.
Georgia officials have said it’s unclear how China’s tariffs on 128 U.S. products might affect some of the top agricultural products exported by this state. However, the good news is that about 90% of Georgia produce goes to the fresh market, thus sparing fruit and vegetable farmers from taking a hit.
China sounded a conciliatory note last week leading up to a scheduled Washington meeting with U.S. negotiators in September. “We hope the United States and China can meet each other halfway and find a solution,” said a Chinese Ministry of Commerce spokesman, who warned that new U.S. tariffs would bring on “an escalation of economic and trade friction.”
At issue is not only the U.S. trade deficit but complaints by the U.S. as well as Europe and Japan that China gets technology either by theft or pressuring businesses and has plans for its government to lead in developing global competitors in robotics, electric cars and other technologies — in violation of its commitments otherwise.
This is a tough fight, obviously for very high stakes. President Trump holds the high ground and a strong hand. We hope his persistence and determination will prevail in the near term and a worst-case scenario will be avoided. America and the rest of the free world should come out winners in this fight.