Since the campaign trail, President Donald Trump has repeatedly challenged what he claims to be unfair deals between the US and its trade partners. He states that the U.S. has been abused by foreign nations, specifically China, who he says is guilty of trade relation abuses. China is the world’s second largest economy behind the US, and Trump’s accusations led many to believe that a full on trade war could be on the horizon.
These fears were realized when on March 22, 2018, the Trump administration rolled out tariffs on steel and aluminum, as well as tech and other commercial products. China responded with their own tariffs on American goods, mainly foods and other produce. These tariffs specifically targeted American farmers and the rural communities. Both countries have tried to de-escalate the situation with “peace” talks, but issues such as the arrest of a Chinese tech executive in Canada on behalf of the U.S. have only served to add fuel to the fire. Even a recent truce between the two countries has done little to solve the problem.
Imports from China affected by the new tariffs are mainly circuit boards and telecommunication equipment, but the Trump administration is seeking to impose additional tariffs on items like cell phones, laptops, and toys. In total, this would be a combined $531 billion in tariffs on Chinese imports. The Chinese government’s response totalled $110 billion. Currently, the exports most affected are yellow soybeans and American produced cars. Should the trade war escalate, other products such as oil and aircrafts could come under fire as well, which would add an additional $57 billion.
Large tech companies such as Apple are at an increased risk. Much of its products are designed in the US but produced in China. Tariffs on tech manufacturing and materials jeopardize production, and can cause dips in company worth. A blow for blow trade war will undoubtedly cause significant turmoil in both the US and Chinese economies.
Trump’s harsh rhetoric towards US trade partners is a concerning development in his foreign policy. Even if the current tensions with China are eased, his tendency towards swift retaliation will likely spawn more conflicts in the future. In July 2018, Trump published a Tweet that emphasized his unforgiving approach to trade. He posted, “Tariffs are the greatest! Either a country that has treated the United States unfairly on Trade negotiates a fair deal, or it get hits with tariffs. It’s as simple as that – and everybody’s talking! Remember, we are the “piggy bank” that’s being robbed. All will be Great!”
Currently, a 90 day “ceasefire” is in effect while both countries attempt to reach an agreement. The Trump administration will hold off on enacting $200 billion worth of tariffs, and the Chinese government has agreed to buy an undetermined amount of American goods to ease the trade deficit. Experts are skeptical if 90 days will be enough time, but for now it’s a step towards de-escalation.
Breakdown of imports affected by tariffs provided by CNBC and BBC.
