It is almost eight years since US President Donald Trump first declared that “trade wars are good, and easy to win”. How much longer will it take him and his tariff hawks to eat those words, and acknowledge the crass economic illiteracy of that conviction? How high a price must everyone pay – in particular, US consumers – before he calls off his tariff war?
As America’s Christmas shopping season gets into full swing, typically accounting for around one third of US retailers’ annual profits, the high price US families are paying is clear. A Tonka toy truck that cost US$30 last year costs around US$40 this year. Artificial Christmas trees, which most US families prefer, are expected to be 10-15 per cent more expensive.
“I honestly feel the government is putting me out of business,” toy retailer Joann Cartiglia told The Guardian. Another small retailer specialising in holiday lights complained of going from “from working for profits to working for tariffs”. One analysis concludes that Trump’s tariffs amount to a US$29 billion tax on Christmas shopping this year.
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How much longer before he recognises tariffs and trade war harm rather than help the US economy? Remember, his aims were to stop trading partners from “ripping us off”, reduce the large US goods trade deficit (in particular with China), reshore manufacturing back to the United States and generate a large new revenue stream to make up for revenues lost from tax cuts.
Eight months into his reckless macroeconomic experiment, the US goods deficit is as large as ever. Imports from China are sharply down, but because US exports to China are even more sharply down, the bilateral goods trade deficit remains big. Reshoring of manufacturing is negligible. Revenues from tariffs fall far short of compensating for the loss of tax revenue, and are anyway being diverted, for example, to the farming sector, which has suffered brutally from lost export sales.
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The “victory” in reducing Chinese exports to the US is pyrrhic, since China’s exports have simply been diverted to other markets – in particular to Southeast Asia, as well as Europe, Africa and Latin America.
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Soybeans: China’s new bargaining chip in trade war with US?
Soybeans: China’s new bargaining chip in trade war with US?
