Trade war end would help US
Research shows raising tariffs failed to achieve major policy goals of Trump administration
Exports to China in 2019 supported 1.2 million jobs in the United States, which would see its employment and household incomes benefit even more if the new administration of US President Joe Biden decides to deescalate the trade war between the two nations, according to research released on Jan 14.
“What we’ve seen over the past few years is that raising tariffs does little more than raise costs for American families and shrink their opportunities,” Craig Allen, president of the USChina Business Council, said at the release of the report on the US-China economic relationship.
The trade war with China hurt the US economy and failed to achieve major policy goals outlined by the former Donald Trump administration, according to the USCBC report, which was done in partnership with Oxford Economics, a global advisory firm headquartered in England.
“Some in Washington are intent on severing ties with China, but this report shows that doing so would have staggering repercussions for the United States, costing billions of dollars in growth in the process,” Allen said.
The report estimated the peak impact of the trade war to be 245,000 US jobs lost due to tit-for-tat tariff actions since 2018.
In all, the cost of the conflict amounted to around 0.5 percent of US GDP from 2018 to 2019, Oxford Economics estimated.
The report forecast that if the trade war continued to escalate, US real GDP growth could be reduced by $1.6 trillion over the next five years, and the US would have 732,000 fewer jobs in 2022 and 320,000 fewer jobs in 2025.
Even a moderate rollback in tariffs could increase economic growth and stimulate employment, the report said.
“Under our trade war de-escalation scenario, where both governments gradually scale back average tariff rates to around 12 percent (compared with around 19 percent now), the US economy produces an additional $160 billion in real GDP over the next five years and employs an additional 145,000 people by 2025,” the report said.
Biden, who has yet to announce a new trade policy, has underscored the “need to be able to build the very best in the United States and sell the very best around the world”.
“That means taking down trade barriers that penalize Americans and resisting a dangerous global slide toward protectionism,” Biden wrote in an article in the 2020 March/April issue of Foreign Affairs magazine.
According to the USCBC report, “Policymakers would be wise to heed that advice and work toward rebuilding the strong bonds that exist between the US and China, to the benefit of both economies and the world.”
Alex Mackel, lead economist for Oxford Economics and the main author of the report, said the Biden administration and policymakers should keep in mind that trade and investment is not a “zero sum game”.
“Both the US and Chinese economies can gain from these bilateral trade and investment flows, and both economies are ultimately better off by engaging in a more cordial relationship,” Mackel told China Daily.
“It’s also just important to highlight the risks there are through economic decoupling, and how much that could cost the US economy,” he added at an online news conference on Jan 14.
The combination of higher tariffs, reduced trade flows and heightened tensions damaged the US economy, firms and households by raising consumer prices and dampening investment while hurting companies’ competitiveness and disrupting supply chains, the USCBC report said.