Last week, President Donald Trump announced new tariffs on $50 billion worth of Chinese goods, claiming that China is stealing U.S. intellectual property.
What Trump didn’t mention is the extended negative effect his trade war could have on the economy. Instead, he tried to change the narrative, insisting in an April 4 tweet that “we are not in a trade war with China.”
When China retaliated with $50 billion in new tariffs of its own, Trump threatened to add another $100 billion in tariffs, setting off a series of back-and-forth exchanges between the two countries and a flurry of media speculation on how this will all affect the U.S. economy.
Trump released a statement declaring: “In light of China’s unfair retaliation, I have instructed the (United States Trade Representative) to consider whether $100 billion of additional tariffs would be appropriate.”
Here are some things you should know about Trump’s proposed trade war with China.
The tariffs will increase the price of imports, making consumer goods prices higher. Ultimately, higher prices will hurt the consumers who actually buy stuff, Time reported. Trump’s targeted products focus mainly on industrial machinery — aircraft parts, steam turbines –that everyday Americans don’t usually buy, but companies that use those materials will pass the added costs on to consumers. “Campbell’s Soup, for example, said that new tariffs on steel would lead the company to raise prices,” according to Time.
The National Retail Federation, an industry group, said in a statement that while it understands the need to address China’s unfair trade practices, “these tit-for-tat trade actions could…make it harder for Americans across the country to afford everyday products and basic necessities.”
Earlier this week Chinese president Xi Jinping conceded that tariffs on U.S. cars and trucks imported into his country are too high–and he’s decreasing them. “China’s 25% auto tariffs are highly protectionist when compared to the U.S. 2.5% auto tariffs,” said Chris Macke, founder of economic policy services firm Solutionomics, in a Forbes interview.
When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE – going on for years!
— Donald J. Trump (@realDonaldTrump) April 9, 2018
Yes, Trump’s tariffs could affect your retirement funds. Tariffs will cause corporations to look for ways to generate more revenue which could result in a decline in the value of your investments. “There is a good chance your wallet will take a big hit from a trade war if you’re one of the millions of Americans who save for retirement using a 401(k) or you are otherwise invested in the global stock market. Tariffs don’t simply affect one targeted product. They disrupt supply chains and drive prices higher, leading to extended economic ripple effects,” Time reported.
In fact, China buys 61 percent of U.S. soybean exports and more than 30 percent of overall U.S. production, according to the Washington Post. So Trump’s tariffs on soybeans will drastically affect U.S. soybean farmers.
Experts predict that unemployment could rise. “China’s (announced) retaliatory tariffs target a number of specific industries–U.S. soybeans, tobacco, and automobiles, to name a few. Decline in demand for those products would have a direct and close-to-immediate effect on employment in those industries,” Time reported.
U.S. steel and aluminum manufacturers have already benefited on certain products from Trump’s tariffs, which went into effect last month.
Last month, China filed a formal complaint with the World Trade Organization challenging Trump’s tariff hike on imported steel and aluminum. “The WTO will give both sides 60 days to reach an agreement. If no agreement is reached, Beijing could request an arbitration panel hearing against the U.S.,” Forbes reported.
If Trump’s’ trade war with China escalates it could have global ramifications, affecting not just the two main players but countries worldwide. “Any escalation in trade tensions that leads to a significant fall in U.S. imports from China would have a sizable impact, not just on China, but on other countries such as Taiwan and Malaysia which export a lot of intermediate goods to China,” economists at Capital Economics wrote in a research note, CNN reported.
China is the No. 1 holder of the U.S. debt, with $1.16 trillion in January, according to the U.S. Treasury.
China has thought hard about their counter measures, and they know farmers are very strong among Trump’s base. China is trying to turn them on Trump, and chances are it will be successful. People vote with their pocketbooks. 128 U.S. tarrifs imposed by China.
— Zero (@zd3coder) April 2, 2018
https://twitter.com/OptimaSb/status/981331582517522433
https://twitter.com/BearVollmer/status/982421336638279680
