Trump’s latest protectionist move threatens to upend global supply chains for corporations such as Apple and Dell, raise prices for American consumers who have grown accustomed to inexpensive electronics and aggravate tensions between the world’s two largest economies.
“The pain will be very visible and the potential gains will be very abstract. The administration hasn’t prepared the U.S. for the downsides of a trade war,” said Brad Setser, a former White House economist in the Obama administration.
The Chinese Embassy said Tuesday that it “strongly condemns and firmly opposes” the U.S. action. “As the Chinese saying goes, it is only polite to reciprocate. The Chinese side will resort to the WTO dispute settlement mechanism and take corresponding measures of equal scale and strength against U.S. products in accordance with Chinese law,” the embassy said in a statement.
With just seven months before congressional elections, a worsening trade war with Chinacould pose a political challenge for the president, who promised his supporters he would overhaul U.S. trade policy to benefit American workers.
Voters disapproved of Trump’s handling of trade policy by 54 percent to 34 percent in the latest Quinnipiac University poll, with only Republicans and white voters without a college education backing his tariff offensive.
In acting, the president swept aside opposition from business groups such as the U.S. Chamber of Commerce and the National Association of Manufacturers, which agree that China’s mercantilist policies must be confronted but fear the consequences of a tit-for-tat trade conflict.
“If history is any indication, these proposed tariffs will not work and will be entirely counterproductive. Tariffs penalize U.S. consumers by increasing prices on technology products and will not change China’s behavior,” said Dean Garfield, chief executive of the Information Technology Industry Council, which represents companies such as Apple, Dell, IBM and Google. “Instead, the administration should act consistent with international obligations and work with other countries to address systemic issues with China.”
The Office of the U.S. Trade Representative released a list of 1,300 proposed tariff increases, but set a 30-day period for receiving comments from affected businesses. That pause leaves an opening for the sort ofnegotiated settlement that business groups favor.
In compiling the list, U.S. officials used algorithms to identify products that benefited from China’s state-directed campaign of technology acquisition while eliminating those whose inclusion would disrupt the U.S. economy.
The list was drafted to achieve “the lowest consumer impact,” according to Robert E. Lighthizer, the U.S. trade representative. So, clothing and toys were excluded.
But Rick Helfenbein, chief executive of the American Apparel and Footwear Association, said that machinery used to make footwear or clothing will be hit with tariffs. “This would directly raise costs on domestic manufacturers and impact our ability to grow Made in USA,” he said in a statement.
Parts for trash compactors, molds for the manufacture of semiconductors, motors, generators, cassette players, smart cards and high-definition color video projectors dotted the list along with items such as rocket launchers and torpedoes.
The administration’s estimate of $50 billion of affected Chinese imports is designed to balance the harm to the U.S. economy from China’s technology practices and“to obtain elimination of China’s harmful acts, policies and practices,” Lighthizer wrote in a statement accompanying the tariff list.
Douglas Irwin, author of “Clashing Over Commerce: A History of U.S. Trade Policy,” said Trump’s action is one of the largest trade moves in more than three decades. In previous episodes, the United States has wielded tariffs as a tool to compel Japan or the European Union to negotiate resolutions to trade conflicts, he said.
But boththe E.U. and Japan were U.S. allies that shared a market orientation while China is a strategic adversary commanding a state-led economy.
“It’s an enormous retaliation relative to what we were doing with Japan in the 1980s,” said Irwin, an economics professor at Dartmouth College. “The chances of it not working out well is much higher in this case than it was with the E.U. and Japan.”
But if China responds to this latest tariff action on a dollar-for-dollar basis, it could damage more than one-third of total U.S. exports to China and Hong Kong, said Setser, a senior fellow for international economics at the Council on Foreign Relations.
The United States shipped more than $130 billion in goods to China last year, plus an additional $40 billion to Hong Kong, much of which flows through the port city to the mainland.
Chinese action of that magnitude would impose substantial costs on both China’s economy and that of the United States.
U.S. farm groups are especially worried about being caught in the crossfire. China’s response to Trump’s steel and aluminum tariffs landed hardest on the agricultural sector, including fruit, wine and pork.
Future Chinese action is likely to hit the farm belt even harder. The United States exported $12.4 billion worth of soybeans to China last year, according to the Agriculture Department, down almost 13 percent from the year earlier as Chinese buyers began turning to alternative suppliers such as Brazil.
In Evansville, Ind., Joe Steinkamp, 52, raises soybeans and white corn on a 1,500-acre plot his family has farmed for 100 years. He exports about one-third of his soybean crop to China, so if the Chinese shun American suppliers, he risks losing around $170,000 in annual income.
“We’re all about trade with China. We spent the last 25 years building that trade relationship,” Steinkamp said. “I appreciate the president looking out for our entire country. We just don’t want soybeans to be the fall guy and take all the punches from the Chinese.”