The War Trump May Lose
Trump loves tariffs. These are additional taxes on imported products just for spite and to try to even the economic tables. Most economists will tell you that a "tariff war" is a real gamble to try to get your way with a beast like China. American subsidies on American farmers is $10 billion, last years soybean crops China has not bought, so they are rotting. China buys millions of American farm products. Many Republican states are farming states and it will be interesting to watch as the war develops, if those farmers support Trump as they once did.
Trump is gambling that China would not retaliate. They did in the first round with over $60 billion in tariffs on American products. China has hinted it will stop all purchases of American farm products- soybeans, wheat, corn etc. If the trade war worsens, China's ultimate weapon is dumping the U.S. Treasury notes of US debt, which China owns most of. Trump has imposed and additional 10% tariffs on $200 billion of Chinese products last year. Trump now has said this will increase to 25% on June 1.
Here is China's tariffs just announced to occur on June 1:
Here’s the details:
- 25% tariffs on 2,493 items
- 20% tariffs on 1,078 items
- 10% tariffs on 974 items
- 5% tariffs to continue on 595 items
This trade war is about saving face within each countries political realm. China's leader is equally as tough as Trump, Trump is hoping a win here will tell his voters that he keeps his campaign promises by America first. The Chinese would never change their economic system now despite Trump 's demands. That is such a naive thing to demand. Would the U.S. change their economic system to one like China? So that demand was "pie in the sky".
Since we are in just the early stages of a trade war, it is hard to tell what options each side has for leverage over the other. But, in the end, it will be the consumers of both countries that will suffer when the tariffs hit. Americans will be paying more for most Chinese made items (which is nearly all things) and the Chinese will be paying more for American made items, which are much less prevalent because China restricts American imports to protect their own market. So, the Chinese will be able to handle the bad effects longer because American farmers rely on Chinese purchases of their crops now, even before the tariff war. Now, they will be hurt further.
Trump has suggested that the U.S. government should buy the farmer's crops normally sold to China, well, this is simply another way to buy their vote and devotion in 2020, and the trade war could last that long if one of the giants in this face off does not give ground.
Trump warned the Chinese not to retaliate. Stupid. China is doing that already in the South China Sea. There, they have basically stolen atolls they claim as theirs and created military bases armed with anti-ship missiles. America basically looked the other way but now challenge them by sailing through the area, as if, that will change anything. One can only see this area as a military flash point when China desires. This is another concern for the USA.
Trump's cause is noble, even out the trade arena between the world's two giants. On paper it sounds great, but most will tell you tariffs and trade wars usually end bad for BOTH belligerents. If Trump stands fast, so will China, and in the long run into 2020, Trump may revise his position when American voters start to complain about the tariffs for all the Chinese products entering into America.
