U.S.China trade war could become an economic threat
Trump’s escalating trade feud with Chinese causing more concern here, abroad
WASHINGTON» Seeking betterskilled workers, Cedar Electronics decided last year to return some of its manufacturing to the United States from the Philippines, only to run smack into a worsening U.S.China trade war.
Cedar makes radar and laser detection systems. When it shifted the assembly of those machines to Westchester, Ohio, it provided jobs for 30 people. Yet with President Donald Trump escalating his tariffs on Chinese imports, Cedar must now pay hefty taxes on critical imported parts — tariffs it didn’t have to pay when that manufacturing was done overseas.
“We’re effectively being penalized for bringing back that product manufacturing from the Philippines to the U.S.,” said Chris Cowger, the Chicagobased company’s chief executive officer. “If we had known this time last year, we most likely would not have brought those jobs back.”
Trump on Monday intensified his trade war with China by announcing tariffs on an additional $200 billion of Chinese goods, including antennas and other electronic components that Cedar incorporates into dashboard cameras, CB radios and its detection systems. That followed tariffs on $50 billion in goods that Trump had already imposed on Beijing, which retaliated in kind.
Seafood, handbags, baseball gloves and
thousands of additional items were also affected by the latest Trump tariffs. China swiftly announced that it would impose tariffs on $60 billion of U.S. exports. Caught in the crossfire are companies like Cedar that depend on affordable imports and other businesses whose exports may now become prohibitively expensive in China.
The titfortat blows signal that the trade fight will likely escalate further. While most analysts say the latest tariffs will likely have only a minimal effect on the U.S. or Chinese economy for now, they stand to inflict real damage, in the United States and perhaps globally, beginning next year. The latest Trump tariffs will start at 10 percent next week but will jump to 25 percent on Jan. 1.
What’s more, Trump has warned that if China retaliates with its own tariffs, he is prepared to tax an additional $267 billion in Chinese imports. At that point, the Trump administration will have raised tariffs on virtually every good China sells the United States.
Because China said Tuesday that it would retaliate, Trump is now in a position, some analysts noted, in which he must follow through on his threat or lose credibility. That makes it more likely that the additional tariffs will be take place. Yet few think Beijing is prepared to yield.
“President Trump issued an ultimatum to China: Surrender unconditionally or face unprecedented tariffs,” said Gregory Daco, the chief U.S. economist at Oxford Economics. “China won’t surrender.”
If tariffs on the additional $267 billion of Chinese imports are put in place, the total hit from the administration’s trade fight with Beijing could slow U.S. economic growth by a third, to roughly 2 percent, in 2019, Daco estimates.
“This is the point where we move from very small effects to something that’s more notable,” said Lewis Alexander, an economist at Nomura Securities.
The worsening dispute, Alexander said, is taking the United States into unknown economic territory. For the past three decades, the U.S. economy has become increasingly open and more globally connected, with complex supply chains moving its products and those of its key trading partners across borders with few obstacles.