5 lasting effects of tariff dispute
By imposing taxes on $200 billion in Chinese goods, President Donald Trump has intensified a battle of wills between the world’s two largest economies — and the outcome is far from certain. Here is a look at five potential consequences:
1 Consumers
Unlike the first two rounds of tariffs totalling $50 billion, the new taxes launched by Trump would more directly hit American consumers. “As president, it is my duty to protect the interests of working men and women, farmers, ranchers, businesses, and our country itself,” Trump said. Starting next Monday, the US is to begin charging a 10 per cent tax on thousands of Chinese imports — tyres, windshield wipers, baseball gloves, bicycles, snakeskin pants, backpacks, trombone cases, refrigerators, among others. The list runs into 194 pages.
2 Companies
Many companies have warned that Trump’s tariffs threaten to disrupt their businesses and depress their revenue. The monthly manufacturing index by the Institute of Supply Management noted that some companies have expressed concern about tariffs despite an otherwise robust US economy. One food and beverage firm in the ISM survey said, “Suppliers appear to be bracing us for cost increases, given increased talk of tariffs and inflation.” Trump’s tariffs, with their uncertain duration, make it difficult for companies to plan for the future.
3 Financial markets
So far, the stock market has taken the threats of tariffs in stride. Share prices have dipped, only to then resume their growth, in part because of deep corporate tax cuts that took effect this year and a solid US economy in its 10th straight year of expansion. But the new round of tariffs risks triggering a more alarming response by investors. The additional taxes suggest that the two countries are struggling to make progress in settling their differences.
4 Global economy
A prolonged trade war between the US, the world’s largest economy, and China, the second-largest, would ripple through the rest of the globe. Tariffs could translate into less trade, which could hinder growth in smaller nations. The US dollar has already begun to rise in value as trade tensions have mounted. This has insulated the United States from higher prices. But the higher-valued dollar has also diminished the value of currencies of emerging markets – which has weighed heavily on their economies.
5 Politics
The Republicans’ control of the House and the Senate is at stake in the midterm congressional races in November. Trump has portrayed the import taxes as a winning electoral issue because they’re forcing other countries to compromise with the US. But public opinion suggests that his tariffs could prove a vulnerability. A poll released August 24 by The Associated PressNORC Centre for Public Affairs Research found that 61 per cent of Americans disapproved of the president’s handling of trade negotiations.