The Trump administration’s trade war with China has already taken a toll on some US industries, but the full short- and long-term consequences of the conflict, should it escalate any further, could take years to tally. A report on Friday that US and Chinese officials are drawing up a “roadmap” to resolve the escalating trade dispute has prompted some optimism and comes as concerns grow among Trump’s political base ahead of important midterm elections.
Lost in the ivory tower debates about who will “win” the trade war are the wide-ranging side effects of such a confrontation. Much has been made of observations that the US economy is now “firing on all cylinders,” following massive corporate tax cuts that effectively dull the pain of tariffs.
But for the US agriculture industry, as well as many small and medium-sized enterprises, immediate pain is coupled with knock-on reputational costs. American farmers and small businesses have spent decades traveling to China to court business partners. The potential loss of goodwill that might come from a protracted trade conflict is hard to quantify.
It is these same farmers and entrepreneurs that helped US President Donald Trump stage a shocking election victory in 2016. In November, Trump is hoping they will go to the polls again to help his party retain control of the House of Representatives, a feat that increasingly looks like it will be as difficult as his election victory was.
Illustrating just how surgically China (along with Europe, Canada and Mexico) have struck Trump’s political base, the US Chamber of Commerce measured the distribution of retaliatory tariffs by state affected.
Not only were the top six states all places that voted for Trump in 2016, but three of them – Michigan, Pennsylvania and Wisconsin – were swing states that traditionally vote Democratic. All of the states have competitive House races that could help hand Democrats a majority in the House of Representatives, a development which could cripple some of Trump’s policy initiatives and weigh the White House down with ethics investigations.
Against this backdrop, the Trump administration appeared poised at one point in the spring to reach a deal with China to avert a tariff battle. Rival factions in the White House duked it out over whether to accept a Chinese deal to buy more energy and agriculture products or follow through on the tariff threats. Trade hawks led by US Trade Representative Robert Lighthizer and trade advisor Peter Navarro won over the president in the end, and the trade war ensued.
Farmers were the first to suffer materially. A corn and soybean farmer from Nebraska, deep in the heart of Trump country, summed up the devastating consequences of the trade war in an editorial earlier this month.
“The markets that we have nurtured and developed over decades have been decimated by the administration’s tariffs. Having personally been involved in promoting US soybeans in China, Mexico, and around the world, it is heartbreaking to see all that hard work, not to mention farmer- and taxpayer-invested funds, tossed aside due to a flawed protectionist theory,” lamented the farmer, Bart Ruth.
For small businesses, the consequences are harder to measure, but they are more vulnerable than larger firms, as they become collateral damage due to the tariffs placed on Chinese imports they rely on for production.
While small business owners overwhelmingly supported Trump’s tax cuts, the tariffs effectively cancel out the benefits of the tax cuts. In the case of some businesses, representatives of which recently testified to trade officials, the competitiveness of entire industries could be threatened.
While details are scarce, it was reported by The Wall Street Journal on Friday that midlevel talks next week in Washington between a Chinese delegation and US officials are a lead up to meetings between Trump and Chinese President Xi Jinping in November. It was noted that such meetings often create additional motivation for deliverables in ongoing negotiations.
Top White House economic advisor Larry Kudlow, along with Treasury Secretary Steven Mnuchin, has reportedly drawn up a specific list of asks for China, though it is not yet clear whether the president has made a final decision on whether he would be satisfied with the concessions.
Meanwhile, trade representative Lighthizer is lobbying for the administration to go ahead with an additional round of tariffs on US$200 billion of Chinese goods to further pressure Beijing.
As Trump shifts into campaign mode, pledging to campaign for Republican congressional candidates six days per week starting in September, his ultimate decision on striking a deal with China may come down to whether he feels it will give his party the boost it needs when voters go to the polls on November 6.
The China-US relationship has changed. It will not be the same. China has realised its vulnerability in the tech of tomorrow. It will now full speed on developing it. It also has gained much influence and respect for standing up to the US.
There are fools, fools and fools…..
and there is Lighthizer.
China should stand firm and maintain full court sovereignty and do not give in to US demands because it is the US that has been cheating, stealing, and freeloading on China and the world since Nixon removed the USDollar from the gold standard.
US " pays" for imports from China by issuing and printing worthless, useless fiat currency USDollar without giving up goods and resources in exchange. It is a con job. In effect, the US is stealing from China.
I would speculate that this round of negotiation is the real one where Trump will reveal his true goal: "US stops the trade war" for "China stops importing oil from Iran." Same for.other countries, Trump started his trade war, then soon after, negotiate the real deal in better terms.
No. They thought they could shove down China’s throat what they did to Japan resulting in the Plaza ACccord and yen carry trade giving American hedge funds unlimited bullets in economic war the latest is Turkey. They did it to the Asian Tigers in the 1980s and China stopped them in HK. Trump will be begging Xi for mercy on Republican’s constituents.
Correcton 1997. Read between the lines, eg speculative = American hedge funds using Yen carry trade as bullets. Similar things are being done to the Chinese stocks and that money is being pumped into the American stock market. Bu China is ready for them. Just the fact not all shares are foreigh tradeable has limit the damage, as well as limited out flows. There was an attack to lower the Yuan but that was promptly put to an end. https://en.m.wikipedia.org/wiki/1997_Asian_financial_crisis
WuKong Sun
You didn’t get what I meant.
I don’t think they could impose their rules on China either. But by trying something they know it will be pushed back, and when China pushes back, China would cede on something else. That something else could be exactly THE political goal on their true agenda.
Richard Truong U don’t understand the culture of pirates. They will always ask or demand for more than what they’re willing to accept. eg salary negotiation: if they will accept $100k they will ask for $120. Employer will offer .$90. U ask again for $110. Employer will offer $100. This is called meeting in the middle and fair deal. They never bring up something that wasn’t in the initial few rounds, eg changing the deal at the last minute. Only Asians and especially Chinese will go low first and expect to go higher. This is why Chinese engineers or professionals always make less than their white counter parts. Besides not asking for raises. In selling houses Asians will purposely put the price low to attract more potential buyers. This doesn’t work with Americans as they will call this too gowrong wit be true and start suspect something is wrong with house and will look stupid over bidding. Asians who overbid stupidly feel proud he "trump"/beat all other buyers.
Does xi. Ping pong write these articles ? The trade war isn’t affecting the U.S. at all .China puts tariffs on American food and fuel we put tariffs on Chinese junk , lets see who wins.
is that gringo pls watch CNN or go speak to some of your farmers
is that gringo pls watch CNN or go speak to some of your farmers