President Donald Trump once again popped up on Twitter with his impulsive brashness over China, and announced 10% additional tariffs on the remaining $300 billion worth of Chinese goods starting September 1. While conceding to have constructive talks with Chinese officials about a future trade deal, Trump rationalised his tariff placement as a retaliation to Beijing’s reluctance to buy US agriculture products in large quantities and stopping Fentanyl exports into the US.
Beijing dubbed the act a serious violation of the agreement between the US and Chinese presidents at the G-20 summit in Osaka, and threatened necessary countermeasures.
As Trump historically hasn’t retreated from his tariff misadventures, his provocative action would invite Beijing to take retaliatory measures. Hence, the tense situation could dramatically escalate the trade war between the world’s two largest economies.
It is shocking that at a time when the US-China trade talks were sailing smoothly towards a decisive deal, Trump lashed out with a series of grating tweets. The hasty but expected proclamation elaborates that the kernel of Trump’s tariff strategy has a political backdrop.
Unwinding US military engagements in Afghanistan and trade deals with China, the EU, Japan, and Mexico were Trump’s key promises to his people during his previous presidential campaign. But to date, he has only been able to accomplish a trade agreement with Mexico.
As he has set September as deadline to arrive on a peace deal with the Taliban, he is desperately trying to achieve it, while also trying to strike trade pacts with China, Japan, and the EU. While the new tariffs on Chinese goods would take effect from September 1, Trump craves to pull the plug on trade strains with Beijing quickly.
Trump’s political gambles are hurting the US economy too. As the fresher tariffs aim to penalise Chinese consumer electronics, clothing, shoes, and toys, American buyers of these goods are the definitive victims of Trump’s actions.
Trump’s previous tariffs in May of 25% on $250 billion worth of Chinese goods were expected to have cost every American household $500 annually. If the new tariffs are implemented, Oxford Economics estimates it will cost American families roughly $700-900, while the Peterson Institute reckons a higher figure of $1,270 per annum, according to a report by Newsweek.
Retailers will be the prime target of these tariffs, which will stumble as the new levies will “disproportionately impact apparels, footwear, consumer electronics, and toys”, said Kate McShane of Goldman Sachs in a note to her clients.
Immediately after Trump’s tariff announcement, the shares of Wall Street retailers also tanked by 3%. Wall Street experts also agree that departmental stores are exposed to substantial risks. The US Chamber of Commerce has shown its disappointment on Trump’s tariff hike as its Executive Vice President stated, “Raising tariffs will only inflict greater pain on American businesses, farmers, workers and consumers, and undermine an otherwise strong US economy.”
Global stock markets were also apprehensive of Trump’s tarrif decision. London’s Financial Times Stock Exchange 100 Index, the French stock market, German Dax Index, and Nikkei witnessed nervous investors’ reactions and sank sharply.
Trump’s self-initiated trade war with China not only preys on his voters and haters equally, but it would also put a squeeze on the US economy and GDP, which would be subject to contract over flagging purchasing power of the people across the country.
Additionally, as a result of Trumps’s irrational and unscrupulous trade war, American multinational companies would be forced to shift their manufacturing plants to nearby countries — thereby losing manufacturing jobs in the US — the crux of Trump’s campaign towards China.
Trump’s global war on trade might perhaps help him with another term as president, but by the damage to the US economy and American buyers could be irreversible.
Published in The Express Tribune, August 8th, 2019.