Might President Trump adjust his declaration that trade wars are “easy to win”? On Friday, negotiations between Chinese and American officials ended without the “epic” agreement the president recently predicted. According to news accounts, the White House was caught off guard last weekend when China backed away from elements that already seemed part of a deal. That triggered an escalation in the dispute, resulting, it appears, in a more difficult path to a resolution.
As promised, the president responded by raising tariffs from 10 percent to 25 percent on $200 billion worth of Chinese goods entering the country. He then threatened to extend the tariffs to another $325 billion in Chinese imports, which would translate to levies on just about all Chinese products coming here. No doubt, China will answer in kind, its tariffs on American goods already causing hardship, especially for farmers in Ohio and other states.
The president gets the big picture in the sense that China has not held up its part of the bargain in gaining membership to the World Trade Organization. China has been stingy in allowing access to its market and aggressive in extracting technology transfers and intellectual property. Japan, Europe and others agree: China must operate according to the rules.
In addition, the president has benefited from a strong domestic economy cushioning the overall impact of his tariffs. Yet as researchers from Ohio State and elsewhere have made plain in recent months, it is a matter of time before the exchange of trade blows begins to have a negative effect more broadly. At first, companies may choose to weather the tariffs without raising their prices. That becomes harder the longer the levies remain in place.
Farmers risk more than a temporary disruption in sales to China. They worry about losing access entirely as Chinese customers go to other countries for agricultural goods and develop lasting relationships. Many American manufacturers rely on Chinese-made parts for their products. They may face a competitive disadvantage as they cope with higher prices on a prolonged basis.
Those recent studies have found that industries receiving protective cover from the tariffs have seen benefits. At the same time, researchers have discovered worrisome numbers. A University of Chicago analysis found that tariffs on washing machines have created 1,800 new jobs — at a cost of $1.5 billion to consumers, or about $817,000 per job. A study from the Peterson Institute for International Economics reached a similar conclusion about the steel tariffs, consumers and businesses, including automakers, paying more than $900,000 for each job saved or created.
This is something the president doesn’t mention in his tweets. He boasts about the Chinese paying the tariffs. They do, the study of the washing machine tariffs citing $82 million for the Treasury. Yet over time the burden falls increasingly on American consumers and businesses. Another concern is that the president doesn’t seem to grasp the trade deficit. Americans aren’t losing nearly $400 billion a year to China. They get something in return — the products they buy, not to mention China plowing its dollars into investments over here.
That misunderstanding risks deepening and extending the trade dispute. It also risks distorting what counts as a win. What should Americans want from China? The Chinese aren’t going to change their system. What China can do more readily is widen access to its market without demanding technology transfers in return. It can stop pilfering intellectual property. These aren’t American objectives alone. Japan, Europe and others want the same. Unfortunately, the president missed his chance to rally the international community, in particular, with his withdrawal from the Trans-Pacific Partnership. It would have made winning less difficult.