Trump may prefer a trade war to a deal with China

LETTERS TO THE EDITOR

President Donald Trump seems to be digging in for a full-fledged trade war with China. On Monday, the White House announced that it will impose tariffs on an additional $200 billion worth of Chinese goods, a move that follows the apparent failure of recent talks between U.S. and Chinese officials. The new salvo will overshadow – or perhaps wholly undermine – a recent invitation from Treasury Secretary Steven Mnuchin to Beijing to rekindle negotiations.

Earlier in the day, Trump displayed his appetite for a fight in a series of tweets hailing his protectionist maneuvers, which he claims have significantly boosted the U.S. economy. White House officials later told my colleagues that Trump will further add to the new slate of tariffs on China should Beijing retaliate, as it is expected to do.

Trump tweeted “Tariffs have put the U.S. in a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country – and yet cost increases have thus far been almost unnoticeable. If countries will not make fair deals with us, they will be ‘Tariffed!”’

But in the short term, at least, the punitive measures aimed at China – which Trump accused of posing “a grave threat to the long-term health and prosperity of the United States economy” – will hurt Americans more.

“Trump has ordered aides to set the tariffs at 10 percent, likely leading to higher prices for American consumers. These tariffs are paid by U.S. companies that import the products, though they often pass the costs along to U.S. consumers in the form of higher prices,” my colleagues reported over the weekend. “The U.S. imports roughly $500 billion in Chinese goods each year, and - combined with existing tariffs - these new penalties would cover half of all goods sent to the U.S. from China each year.”

The new tariffs are part of a greater effort by Trump to confront Beijing. After his administration imposed import duties on Chinese goods earlier this summer, China responded with tit-for-tat measures its officials argued were gestures of restraint. Now, rather than cooling tensions, Trump is opting for escalation, seeing a potential trade war as a winning political strategy at home ahead of the November midterms and his own 2020 reelection bid.

This goes against the instincts of many senior Wall Street executives and even some White House advisers, who, though happy with Trump’s tax cuts, are less thrilled by his willingness to unleash chaos upon the global economy. On Sunday, a group of leading American financiers met their counterparts in Beijing for a meeting on U.S.-China business ties that seemed to underscore their diminished clout.

“The Trump administration’s trade hawks have so far prevailed against Wall Street-friendly voices of trade moderation, such as Mr. Mnuchin, a onetime Goldman Sachs executive,” noted the New York Times. “That is partly because the trade war hasn’t shown President Trump much downside. His stance has won support from both parties. The United States economy shows few signs of trade-war damage, and markets continue to rise.”

But that rosy outlook may not last long. “Favorable economic conditions still put the United States in a strong position,” wrote Marie Kasperek of the Atlantic Council. “Yet experts caution that this soon will change, as the impact of additional tariffs would reverse economic tailwind created by the combination of more government spending and the hefty tax cuts.”

U.S. farmers are already feeling the pain of retaliatory tariffs enacted by China, the European Union and other countries targeted by the Trump administration trade actions. Future reprisals from Beijing could raise costs even further for U.S. manufacturers.

At the financiers’ forum in Beijing on Sunday, Lou Jiwei, a former Chinese finance minister, suggested that China could target the supply chains of prominent U.S. companies, like Apple, that are dependent on Chinese manufacturing. Though alarming to many American executives, such rhetoric would gladden some of the trade hawks within the Trump administration, who would love to further “decouple” the U.S. and Chinese economies.

That’s something analysts in both countries would have deemed unthinkable before Trump’s ascension. But now, as some Trump allies hope to foster a split, Chinese President Xi Jinping is also actively pushing for his country’s independence from U.S.-made technology.

White House officials emphasize that Trump is adopting the hard line his predecessors failed to, and that the administration is still open to substantive dialogue. “We are willing to talk with China any time if they are willing to move toward serious talks to remedy the trade problems,” said Larry Kudlow, Trump’s national economic adviser, on Monday. “On something of substance, [Trump’s negotiating team wants Chinese counterparts to] just say yes. Just say yes to a couple of things and then we can move ahead.”

Binyamin Appelbaum tweeted “The Trump administration plans to announce a large tax increase on American consumers this evening. “Tariff” is just a fancy word for ‘tax.”’