Outside In | Why Donald Trump is missing the mark by focusing on goods instead of services

David Dodwell says by zeroing in on the trade imbalance between China and the US, Trump is ignoring the huge potential for US exports in services such as tourism

Reading Time:4 minutes

Chinese tourists take a selfie outside the New York Stock Exchange in July 2015. While just 3 million Chinese tourists visited the US in 2016, they spent US$33 billion. Photo: Reuters

Published: 4:01am, 25 Aug 2018Updated: 7:07am, 25 Aug 2018

With US trade sanctions against China having come into effect, it is a good time to conduct an audit of the “America first” trade war as it focuses on China.

What have the practical impacts been so far? How likely is the strategy to achieve its declared aims? And what are likely to be the unexpected consequences?

First, the practical effects so far in dollar terms are quite small, which is probably as intended ahead of critically important US Senate and House of Representative elections in November. If negative consequences don’t start to be felt until after the midterm elections, so much the better.

Tariffs on US$50 billion a year of Chinese exports means the policy will, in practice, potentially impact goods worth about US$4 billion a month.

If US importers go ahead and buy these goods anyway, they will cost up to 25 per cent more. Pain may be acute in certain areas, but we need to remember that US imports amount to about US$200 billion a month. So the effects of tariffs inside the US are likely to be modest.

Watch: Trade war fears for Chinese pork

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