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The last time a commercial war took place in the United States, things did not go well for the economy. Will history repeat itself while Trump imposes a tariff on steel and aluminum? Here are the facts.
Just the FAQ
FILE – In this file photo of January 3, 2013, a worker collects pieces of dried shark fins on the roof of a factory in Hong Kong. A new series of Chinese tariffs on US seafood includes products made from shark fins. China is one of the biggest buyers of shark fins, as the product is used to make shark fin soup, an Asian dish. (AP Photo / Kin Cheung, record) ORG XMIT: MERB201 (Photo: Kin Cheung, AP)
Contrary to a sporting event in which one side prevails and the other is defeated, it does not matter. There is no guarantee that one of them will win as the United States and China engage in a growing dispute over customs duties.
In fact, in trade wars, both parties often lose – and the spectators get hurt too.
Great victory if China quickly lowers trade barriers and tariffs. That 's what President Donald Trump is hoping for by imposing a 25% tariff on $ 34 billion in Chinese imports, with $ 16 billion more in a matter of weeks. It also threatened tariffs of 10% over an additional $ 200 billion in the short term and another $ 200 billion if necessary.
With all this pressure, he is betting that China will yield because it relies more on US buyers than the other way around.
Theoretically, China is more vulnerable because of the $ 375 billion trade imbalance that has long thwarted Trump
but the reality is that trade wars often have unintended consequences.
"simplistic win-lose equations" gift "said Charles Skuba, a professor of international business at the McDonough School of Business at Georgetown University
Skuba, who served in commerce under the President George W. Bush's administration noted that pure economic data suggest more to lose. "
" However, when you dig deeper, we will find that in an all-out trade war … there are more economic losses, "he said.
The blow-off tariffs blow typically leads to direct hits as well as collateral damage.China imports potentially subject to Trump's latest tariffs range from baseball gloves, seafood, oxygen and raincoats.
] For more information: Taxing on oxygen? Trump may be threatening extensive tariffs on China
For more information: Chinese tariffs will hit hard agricultural states, heavy duty
More: These 15 counties are the most exposed to Chinese tariffs. tariffs that have already taken effect and those who This would reduce US economic growth by half a percentage point over the next year if they stayed in place, said Mark Zandi, chief economist at Moody's Analytics. According to Greg Daco, director of the US economy for Oxford Economics, China would suffer even more because trade accounts for nearly 20% of its economy while it represents Yet, the United States, China and Europe will all fall into recession if Trump imposes all the rights that he has threatened in addition to those already levied – rights of $ 560 billion – all the more so as actions would decimate stocks.
Baseball gloves imported from China appear on the list of imports whose President Donald Trump threatens tariffs. (19659024) Here is a breakdown of the risks and benefits of the commercial battle:
Jobs
Risks : US firms cut jobs by shifting production to foreign markets
All Already taxed or threatened tariffs in the US-China dispute would mean 700,000 fewer jobs in the United States, Zandi estimates.
Production is already moving abroad in another trade dispute like Harley-Davidson Chinese companies could use the same strategy, closing factories in that country, firing workers and moving production to the United States to avoid tariffs and taxes. be closer to American customers.
About 700,000 to 1 million jobs could be lost in Chinese cities, said Daco of Oxford Economics.
Awards : If Chinese tariffs on the US good s lowered as a result of successful negotiations, the long-term effect could be positive for US workers
C & # 39; is because lower costs should translate into higher profits and higher sales.
Placements
Risks : China retaliates by emptying its massive holdings of US government bonds, a decision that would likely increase US borrowing costs for consumers, businesses and the federal government. government and provoke the tumult on the financial markets.
China is the largest foreign investor in US Treasuries, with holdings of $ 1.18 trillion by the end of April, according to the Treasury Department and the Federal Reserve.
The problem, however, is that China opts for According to Peter Hooper, chief economist of the United States at Deutsche Bank in New York, Wall Street denounces the nuclear option, but the Chinese will also suffer from the financial crisis. "Even with trade tensions continuing to increase, we do not see it as a likely scenario," said Andrew Hunter, US economist at UK-based Capital Economics. "It would not be in China's interest."
Other Risks : US companies doing business in China face increased restrictions, which hurts their sales and their profitability
For example, automaker Silicon Valley Tesla has recently been forced to raise prices for California cars sold to Chinese customers after China has increased its tariff on vehicles. "In fact, many US companies rely on Chinese customers for their current and future sales," said Skuba of Georgetown
China agrees to reduce barriers to entry, allowing more open access to US companies. "President Trump has this partly correct – we must put pressure on China to move forward more quickly on their liberalization of the market and essentially allow US companies to have more access and to "
Geopolitics
Risks : China retaliated by refusing to help the United States negotiate a withdrawal of nuclear weapons in North Korea. China could also strengthen its economic ties with other Asian countries, including South Korea, Japan and Thailand, to counterbalance the United States.
China has a political advantage in this regard. could happen in the United States
"Xi is in life, Donald Trump has mid-term elections to settle," wrote David Rosenberg, chief economist and strategist at Gluskin Sheff, based in Toronto, report: "China plays the game at all times and in any case."
Awards : Other countries, fearing economic losses in their own trade war with the United States , accept concessions on the grounds that if the United States wants to risk their lucrative relationship with China, they will do the same.
Mexico, for example, will probably closely monitor the trade war in China, said the Wharton political economist and professor Mauro Guillen Mexico is currently renegotiating the North American Free Trade Agreement with the United States and Canada as Trump calls for better deal
"Every time you announce that you We will impose these rates, you send a message. "Guillen said. "The big question for me is, who is the target audience?"
Follow Nathan Bomey, USA TODAY reporter, on Twitter @ NathanBomey .
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