Free Trade

As Warning Signs Flash, Trump Again Escalates Trade War With China

Another $16 billion in Chinese good are facing tariffs, but Trump wants more. Meanwhile, more signs say the trade war will slow economic growth.


VNA Xinhua News Agency/Newscom

Amid warnings from economists and his own political base, President Donald Trump is pressing forward with a misguided trade war.

The White House on Thursday announced a new round of 25 percent tariffs on $16 billion of Chinese imports, and China immediately responded with more tariffs on American goods and another threat to drag the Trump administration before the World Trade Organization for violating global trade deals. The newest round of American tariffs will target motorcycles, railroad equipment, plastics, and various electrical components, among other things—the full list is 10-pages long.

Following an earlier round of tariffs that targeted $34 billion worth of Chinese imports, the Trump administration has now saddled American consumers with new taxes on $50 billion of imported goods.

The Trump administration has promised that these tariffs—which are legally and logistically separate from the tariffs on steel and aluminum imports—will force China to stop engaging in unfair trade practices and bring an end to the theft of American intellectual property. There is, so far, little indication that the tariffs are doing either of those things, but there is growing concern about how the escalating trade war will reshape the American economy.

Further escalation could have "consequential downside risk" to the economy, members of Federal Reserve warned in a statement issued Wednesday. If the White House continues to raise trade barriers, the purchasing power of U.S. households will be reduced, the officials said, according to a report from Agence France-Presse.

Meanwhile, a Reuters poll of more than 100 economists shows that most of them expect economic growth to slow over the next two quarters as the boost created by last year's tax cuts fades and Americans begin to feel the costs of the tariffs. While the U.S. economy grew by 4.1 percent in the second quarter of this year, the Reuters poll found that most economists believe growth will slow to three percent in third quarter and fall below that mark by the end of the year.

"While Trump has said these trade tariffs will benefit the U.S. economy, no economist polled by Reuters shared that view," the news service reported.

But it looks like this week's escalation of the trade war could soon be overshadowed by a much larger deployment of tariffs. The Office of the U.S. Trade Representative, which is responsible for the China-specific tariffs (but not the steel and aluminum tariffs, which are handled by the Commerce Department), is in the midst of six days of hearings about the prospect of raising import taxes on an additional $200 billion worth of Chinese goods. Representatives from more than 300 companies are scheduled to testify at those hearings. As has been the case at nearly trade-related hearing in previous months, the responses will likely been overwhelmingly negative.

Unlike the first two sets of tariffs targeting Chinese goods, this new proposal would hit thousands of consumer items, including parts for computers and phones, furniture, clothing, and luggage. If approved, the U.S. consumers would be paying new taxes on a total of $250 billion worth of Chinese items—roughly equal to half of all China-to-U.S. trade last year.

That means lots of Americans could soon feel the same sting of tariffs that farmers and manufacturers have already been dealing with.

"The Trump administration has attempted to limit the application of tariffs to manufacturing goods, so it's really masked the impact on consumers even though it raises the costs for inputs to American manufacturers and service providers, that will ultimately be felt by the consumers," Jake Colvin, a vice president at the National Foreign Trade Council and one of the people who testified at this week's tariff hearings, told NPR's David Greene.

Colvin projects that further tariffs will raise prices on everything from apple juice to air conditioners, and video game consoles to bicycles. Eventually, the combination of higher prices for consumer goods, mounting job losses in tariff-affected industries, and slower economic growth should create political push-back against the Trump administration's trade war. An NBC/Marist poll of Texas voters released this week shows that 40 percent believe tariffs will hurt the economy while only 31 percent say they will protect jobs. The needle will continue to shift in toward hurt as long as Trump stays on his current course.

"If you're going to impose tariffs on $200 billion worth of goods," Colvin told NPR, "You can't avoid harm to U.S. consumers."