President Trump’s trade war brinkmanship with China has been answered.
According to the Washington Post:
China threatened to impose tariffs on a range of U.S. imports worth around $3 billion if the two sides failed to resolve their trade dispute.
The Commerce Ministry framed its move as a response to a previous decision by the Trump administration to impose steep tariffs on steel and aluminum imports, but the announcement came only hours after President Trump announced his plans to target China with the further $60 billion in tariffs.
In the United States’ steepest trade confrontation with China in several decades the Trump administration announced tariffs on over $60 billion dollars of Chinese imports, including a further move to limit China’s ability to invest in the U.S. technology industry.
Trump’s actions — which sent stocks to their biggest one-day drop in six weeks and the Dow Jones plunging more than 700 points — has followed the president’s long held belief that China has been taking advantage of American trade balances.
Trump directed the U.S. Trade Representative, Robert E. Lighthizer, to propose within 15 days tariff increases designed to “compensate the United States for lost profits and jobs.” After a comment period, this list, targeting Chinese products that benefited from U.S. technology, will be made public.
Presently, this profit and job deficit the administration is citing for pulling the trigger on the trade war with China has been amorphously defined by the administration as “a loss of 60,000 factories and 6 million jobs.” A number that most economists opine may be a ball-park guesstimate at the impact on U.S. employment of both Chinese competition and automation.
Pulling back from the brink of steel and aluminum trade wars with the Brazil and the EU (Canada and Mexico were already exempted) in the last several days, the administration has now received an answer to the new and broad-ranging tariffs levied against China.
The Chinese Commerce Ministry announced today a compiled a list of 120 products worth nearly $1 billion, including fresh fruit and wine, upon which it would impose a 15 percent tariff if the two countries fail to resolve their trade differences “within a stipulated time,” however, did not accompany the announcement with a deadline.
Global economics are far more complex than just looking at the words “deficit” and “surplus” as adjectives to the noun “trade” and winging trade policy based on elementary school-level guess-work.
And Trump supporters may come in for the tip of the spear in any trade war with China.
At the top of China's list are agricultural products such as soybeans and hogs.
Soybeans and grains are the second-largest U.S. export to China. Trump carried eight of the top 10 soy-exporting states, and the critical swing states of Michigan and Wisconsin are in the top 15 soybean exporters, according to U.S. Department of Agriculture data. Airplanes, the top U.S. export to China, could also end up on the hit list.
Top retailers including Walmart and Apple have sent letters to Trump urging him not to do this because it would worsen inequality and “punish American working families with higher prices.” The Tax Foundation pointed out that Trump's tariffs on China would cancel out about 20 percent of the benefits of the recent GOP tax cuts.
China is telegraphing they have the will to step up to any trade tariff challenge.
CNN Money has reported that China’s embassy in Washington said in a statement late Thursday:
"China would fight to the end to defend its own legitimate interests with all necessary measures, China is not afraid of and will not recoil from a trade war.
“If people want to play tough, we will play tough with them and see who will last longer.”"
Although Trump likes to tweet tough, sic lawyers on those he can punch down at, and shout “You’re fired!” on a scripted reality show; in real life he is known to be personally “conflict-adverse.” It remains to be seen how Trump and the newly-minted “President for Life” of China, Xi Jinping, square off in a virtual MMA no-holds barred trade match.
When the reasons given by the White House for kicking off a trade war with China is due to a general “feeling” that there is an “unfair” trade imbalance in intellectual property and jobs, without any seeming consideration to the overall trade reality of the economics of trade balances with China, most observers (including the markets) are left in breathless astonishment.
Indeed, the word “balance” seems sorely lacking from this administration’s vernacular.
In early 2016 the Economist Intelligence Unit list Trump winning the Presidency as one of the top 10 global risks.
"The research firm warns he could disrupt the global economy and heighten political and security risks in the US." "He is rated as riskier than Britain leaving the European Union or an armed clash in the South China Sea."
Today, in the Economist Intelligence Unit global risk ratings: “Global Trade Slumps as US Steps Up Protectionist Policies” is rated #20.
Speaking about the reasoning for implementing this trade war with China, Trump said this about our trading status:
“Any way you look at it, it’s the largest of any country in the history of our world,” the president said. “It’s out of control.”
Something one is indeed “out of control.”