U.S.-China trade fight likely a blip for economy
Long-term concern is over how long tariffs might last
The latest trade skirmish between the U.S. and China would barely nick the American economy — even if the two countries carried out their threats.
Looming, however, is the risk of an escalation of the dispute that could prove damaging, economists say.
The U.S. on Tuesday threatened to slap 25% tariffs on $50 billion in imports from China, including semiconductors, aircraft engines and telecommunications equipment.
China hit back on Wednesday, saying that if the U.S. follows through, it would impose 25% tariffs on $50 billion in U.S. shipments to the country, taxing 106 goods, such as soybeans, beef, whiskey, cars and industrial chemicals.
Many experts believe the threats are negotiating ploys and the two countries are likely to settle the feud in coming weeks, or at least scale back the tariffs.
If they don’t, the U.S. tariffs likely would be partly absorbed by American companies and partly passed to consumers, says Kathy Bostjancic, head of U.S. macro investor services for Oxford Economics.
Prices for electronics and other equipment sold in the U.S. could rise about 15%, lifting overall consumer prices, excluding food and energy, by a modest tenth of a percent.
That could dampen consumer spending, but only marginally — by less than a tenth of a percentage point, Bostjancic says. The tariff would affect just 2.5% of all U.S. imports, she says.
Meanwhile, the Chinese tariffs on U.S. products could prompt Chinese distributors and consumers to buy less soybeans, whiskey, beef and other items from the U.S. That could hurt the sales of farmers and other producers.
“If China buys more (soybeans) from Brazil this summer, the U.S. will sell more to other countries,” says Michael Pearce of Capital Economics. China is the biggest global customer for U.S. soybeans, with about $13 billion in annual purchases.
Agriculture Secretary Sonny Purdue said Wednesday, “I talked to the president as recently as last night. And he said, ‘Sonny, you can assure your farmers out there that we’re not going to allow them to be the casualties if this trade dispute escalates.’ ”
The long-term concern for U.S. agriculture producers is how long any tariffs might last, said Will Rodger, director of policy communications for the American Farm Bureau Federation. The longer any sanctions last, the greater the chance “that there could be buyers who are no longer interested in you,” Rodger says.
By crimping Americans’ spending, the U.S. tariff on Chinese imports could cost tens of thousands of American jobs by early next year, says Mark Zandi, chief economist of Moody’s Analytics.
But all told, the skirmish would be a blip in an economy that generated 2.2 million jobs last year. It would trim economic growth by less than a tenth of a percentage point this year and by close to a tenth of a percentage point in 2019, Bostjancic says.