Trump's 'Deal' With China Leaves American Consumers and Exporters Facing Higher Tariffs Than Before
The White House calls it "the art of the deal," but a 30 percent tariff on imports from China is economically damaging and constitutionally dubious.
On its own, the deal struck Monday between the U.S. and China to de-escalate the trade war is undeniably a positive development.
As part of the deal, the U.S. will temporarily lower tariffs on Chinese imports from 145 percent to 30 percent (which will be applied on top of other tariffs imposed by the first Trump administration). That may be enough to stave off the worst consequences of the tariffs and might unfreeze the flow of goods across the Pacific Ocean.
More broadly, however, the deal is a tidy illustration of how President Donald Trump has conducted his global trade war. With China, Trump hiked tariffs to astronomical levels while promising those taxes (which are paid by Americans) would unleash prosperity and create jobs. Then, the White House celebrated the agreement that reduced those tariffs as "the art of the deal." They are literally doing the meme.
But the "deal" means that imports from China will be subjected to significantly higher tariffs than when Trump took office. Those tariffs will continue to be a serious economic burden for American businesses and consumers, and the threat of even higher tariffs remains—because the "deal" only pauses those tariffs for 90 days, and because Trump's mercurial nature means no one can really be sure what is coming next.
"A pause is not a solution. It's a stay of execution for small businesses that still don't know future product costs, and in many cases have taken steps that can't be undone," wrote Dan Anthony, president of the Trade Partnership Worldwide, an international economic think tank.
Steve Lamar, president of the American Apparel and Footwear Association, called the 90-day pause "welcome" because it may thaw what had effectively become a trade embargo between the two countries.
However, the remaining 30 percent tariff, which is stacked on top of preexisting tariffs from Trump's first term, "will still make for an expensive back to school and holiday season for most Americans," Lamar said in a statement. "If freight rates spike due to the tariff-induced shipping disruptions—which will take months to unwind—we could see costs and prices creep up even further."
The Penn Wharton Budget Model's tariff simulator estimates that the remaining 30 percent tariff on all imports from China would be a $639 billion tax increase over 10 years.
Meanwhile, American exports to China will also face higher tariffs in the wake of this "deal" than they did in the pre-Trump status quo. The 10 percent tariff that China will continue charging on American imports will be one of the highest tariffs in the world for American goods entering foreign countries, notes Bryan Riley, director of the National Taxpayers Union's Free Trade Initiative.
That's despite the White House repeatedly claiming that Trump's trade war is intended to lower barriers to American exports. By their own metric, this deal fails.
Any de-escalation of what could be a catastrophic trade war between the world's two biggest economies is an encouraging sign, but both America and China are still worse off than they were a few months ago. Trump has used constitutionally dubious economic powers to raise and then lower tariffs, creating huge costs and even greater uncertainty.
Rather than praising the president for backing down from an insane position, as the White House believes Americans should do, the proper response to Trump's latest tariff maneuvers is the same as it has always been: Congress must take away his tariff powers.
