Trump vs. China proves patience is a virtue
September 12, 2019
With a U.S. goods trade deficit from China of nearly $420 billion in 2018, one of President Trump’s primary campaign goals is to help eliminate some of the ridiculously large deficits we are forced to bear. The Trump administration believes that these practices have put U.S. companies at a disadvantage, but with over half of U.S. imports from China being electronics or machines, it is important that we are able to have good, fair trade deals so that everyone can benefit equally.
Our economy has a high potential to stimulate both our and the international economy if Trump can establish firm and fair trade deals so that we are not hindered on our productivity and advancement in booming fields.
In Mar. 2018, Trump announced tariffs on steel and aluminum from China, and three weeks later, China announced tariffs from 15%-25% on over 100 U.S. goods; including things such as wine, ethanol, and fresh fruit, totaling about $3 billion of our annual goods. This was the start of the trade war that is still escalating today, where it seems it may not be finished until post-election and trade uncertainty.
Come June we added another $50 billion worth of Chinese goods and another $34 billion subject to a 25% rate come July. China’s response was to retaliate by setting an equivalent tariff on our goods. Trump started to get serious, as he then more than doubled what he originally threatened and imposed 10%-25% tariffs on over $200 billion worth of Chinese goods.
China came out two days later to say it will impose tariffs on $60 billion of U.S. goods if Trump is to go through with his threat. It’s important that America as a country makes sure to stay the police and ‘superpower’ of the world, and in order to do that we must remain persistent. Trump’s $200 billion tariff he implemented in September of last year aimed to cut half a percentage point of China’s overall GDP, these kind of effects are what he hopes will hit hard with China’s President Xi Jinping. Trump explained in an interview just a few days ago that because of these new tariffs “we are in an incredible negotiating position.”
Formal Chief Economist for the U.S. international trade commision Peter Morici gave his opinions on Fox News explaining that another option is that we, “Should redirect supply chain to southeast asia, as we can show China that we do not need them to provide everything for us,” which is a great option for our country if the trade war with China somehow goes south.Morici also explains in this interview that China has been, “Using trade tariffs to steal technology, erode our competitive advantage, and have expressed the idea that they want to be globally dominant and establish and empire where we are all contributors to them.”
Recently, China released an announcement that they will exempt 16 types of US goods from tariffs, the two lists of items include cancer drugs, mineral oil, and grease; the first time Beijing has given an exemption since the trade war began.
China is showing us that they are willing to come to an agreement and that they see this cannot go on forever. Looking at the stock market since this news was announced- Dow Jones is +62.46 (+0.23%) in the last two days, and S&P 500 is now +7.21 (+0.24%), which shows the market is hopeful of the trade war and that we should be heading in the right direction from here on.