Push for tariffs squeezes weakening global economy
NEW YORK >> The global economy was already showing signs of a slowdown when President Donald Trump reminded the world of his love of tariffs and sent a chill through financial markets.
“I am a Tariff Man,” Trump announced Tuesday to signal his devotion to import taxes — a remark that served to downplay the likelihood of ending his trade war with China. Stocks sank across the world, in part over fear that an escalation in tariffs would choke off economic growth and possibly send a global slowdown into a recession.
By Wednesday, Tariff Man had tweaked his message to suggest more optimism on the odds of forging a deal with President Xi Jinping. Their meeting last weekend at an economic conference in Argentina produced a 90-day truce, a suspension of further increases in U.S. tariffs on Chinese goods and a pledge by Beijing to buy more U.S. goods.
“Not to sound naive or anything, but I believe President Xi meant every word of what he said at our long and hopefully historic meeting,” Trump tweeted. “ALL subjects discussed!”
Still, Trump’s rattling of the global economy came at a precarious moment, with the economic outlook for 2019 dimming and concerns about a potential recession — if not next year then soon thereafter — rising.
The economic stimulus from U.S. tax cuts is beginning to fade. Britain is struggling to leave the European Union. Italy’s debt is widening. China is trying to navigate a slowdown after decades of unsustainably fast growth. Germany, Europe’s largest economy, shrank in its most recent quarter.
Global growth was already slated to slip to 3.5% next year from 3.7% even without accounting for the risks of escalating U.S. tariffs and China’s counter-tariffs, according to estimates by the Organization for Economic Cooperation and Development, an intergovernmental think tank of 36 nations.
Now, businesses, consumers and nations must account for the chaotic confusion injected by Trump’s evolving and conflicting messages about his administration’s trade relationship with Beijing, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Shepherdson worries that the president’s fondness for tariffs might itself be enough to further suppress growth.
“The uncertainty caused by the whipsawing of his trade stance means that business investment will be delayed or canceled, marginal hiring decisions will be postponed and potential overseas business partners will look elsewhere,” Shepherdson said.
Trump imposed tariffs of 10% on $200 billion worth of Chinese goods in September. Those tariffs were set to rise to 25% on Jan. 1. The president had also threatened to impose tariffs on essentially all the remaining goods from China that aren’t already subject to his higher tariffs. The TrumpXi dinner negotiations, though, led the two sides to hit pause and agree to 90 days of negotiations.
Trump says he wants to shrink a gaping $336 billion U.S. trade deficit with Beijing — the gap between how much America buys from China and how much it sells — and stop the Chinese from stealing or forcing the handover of U.S. technology and intellectual property.
Complicating the problem is that all this is happening against the backdrop of weakening growth around the world.