Julia Truog
There has been a lot in the news about the “Trade War.” And today I saw a headline saying the U.S. and China are close to a trade deal (USA Today). Hold on—let’s back up a minute. What’s a trade war, anyway, and why did President Trump start one?
A trade war begins when one country imposes tariffs or quotas on goods imported from foreign countries. There have been two main arguments behind the trade war with China that began last year (Washington Post). The first is that President Trump started it in retaliation for the Chinese government stealing proprietary technology data from the U.S. The U.S. has always been a great innovator, especially in the area of technology, and many believe the Chinese government is not above stealing to get what it wants. The second reason President Trump started the trade war was to deliver on his campaign promise to “Make America Great Again.” The U.S. imports lots of steel from China, so if the U.S. slaps a 25% tariff, or tax, on steel imported from China it makes domestically produced steel in the U.S. more competitive from a price standpoint. If the U.S. can sell more of its steel here at home, that means more jobs for steel workers, which is one of the industries Trump wanted to revive in his “MAGA” campaign.
President Trump said “Trade wars are good and easy to win” and lots of people like the idea of taking care of jobs at home. But there are consequences to starting a trade war. First, China will of course respond by placing tariffs on goods they import from the U.S. As an example, after Trump started the trade war China responded by cancelling all of its soybean contracts with the U.S. China imports $12 billion of soybeans from the U.S. annually to feed pigs, their primary source of meat (The Balance). That has a negative effect on U.S. farmers that could last for years. China has other options for getting soybeans, like from Brazil, for example, who is more than happy to take our place.
Trade wars also eventually lead to inflation. If the price of steel is higher, that impacts car manufacturers who now have to pay more for the steel they buy to manufacture vehicles. That increase is eventually going to be passed along to the consumers who buy those vehicles. So while there may be more jobs for steel workers, the auto industry will be hurt because of higher prices for the materials they need.
Right now the U.S. imports more from China than it exports to China. It’s reasonable to want to find a trade balance and to protect U.S. intellectual property. But a trade war is not easy to win and not without consequences. We’ll have to stay tuned to see how this plays out.
Works Cited
Amadeo, Kimberly. “Why Trade Wars Are Bad and Nobody Wins.” The Balance Small Business, The Balance, www.thebalance.com/trade-wars-definition-how-it-affects-you-4159973.
Snider, Mike. “US, China Reportedly Close to Trade Deal Lifting Most Tariffs on Chinese Goods.” USA Today, Gannett Satellite Information Network, 4 Mar. 2019, www.usatoday.com/story/money/business/2019/03/03/us-china-reportedly-near-trade-deal-lifting-tariffs-chinese-goods/3050340002/.
Waldman, Paul. “The Real Reason Trump Wants to Start a Trade War.” The Washington Post, WP Company, 2 Mar. 2018, www.washingtonpost.com/blogs/plum-line/wp/2018/03/02/the-real-reason-trump-wants-to-start-a-trade-war/?noredirect=on&utm_term=.a13bde79a08d.
I believe that a trade war with the US is not a very smart move. Especially if China places tariffs on all of it exported goods going to us. It is very difficult to buy something that is not “made in china” so we know that expenses will go way up. Although Trump claims that trade wars are easy to win, the concequences are definitely not worth it. Along with my own now empty pockets, the government will also have empty pockets, due to higher prices on imported goods from China. This doesn’t help our debt and it definitely doesn’t help “make America great again”.
ReplyDeleteI thought your explanation of the impact of trade wars was well communicated and illustrated the reaching consequences of economic actions well. Additionally, the way you described the mindset of proponents for trade wars before going into the economics and downsides of it made your argument more credible. However, I thought that the post could have been better wrapped up, as you introduced economic evidence concerning trade wars, but didn't expand upon that as well as you could have. The ending felt inconclusive, and I think you could have fixed that by making some prediction as to where this might lead. This could have been done by citing examples of trade wars, and how they ended.
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ReplyDeleteYour explanation of the trade war between the United States and China was really clear and easy to understand. Personally, I don’t think that the trade war was a smart move on the president’s part. So many of our goods are imported from China and by slapping on a tariff, it’s going to hinder a lot of the goods that we use on a daily basis. Because our trade is a two way trade between the United States and China, China can easily replace the US with other manufacturers or producers and therefore cut us off which can destroy our economy that relies on a lot of imports from China. China also has put on tariffs that have hurt our economy like how our tariffs have hurt theirs. All in all, it looks like a lose lose situation. If we really wanted to figure out the trade scandal and market dominance that China has and how to reduce it, our government should have worked to utilize diplomacy and work it out rather than impulsively throw a tariff on China without completely working out the consequences and opportunity cost of that choice.
I agree with the previous comments that starting a trade war is not the best thing for the United States right now. We all know how many of the goods we use come from China and by getting in a trade war we are hurting our own economy. If we produced many of the goods in the United States the price would be much higher, and this price would fall on the consumers, therefore shifting the demand curve. Or forcing our government to subsidies the production of these products. Overall I just think there is a better way to work out these problems then trying to tariff other countries goods. Not only will this trade war impact the United States but also the workers in China.
ReplyDeleteStarting a trade war would be one of the worst choices ever currently. So much of our engineering business have companies based out in China in production to try and keep sales up. This is a huge issue because this is due to the production of goods being created in the US is way higher. With that in mind, if we want to bring things back over we need to try and lower the cost of making the products along with those taxes. When that happens not only would that bring back some business to the US land, but China wouldn't feel like they're being attacked because US isn't posing a lot more Tariffs to bring production back.
ReplyDeleteWhile I agree with your assessment that a trade war needlessly harms the economy, it was fundamentally a political not an economic decision. He was motivated to do this due to pressure from the steel industry which employs a lot of workers in states like Michigan, Ohio and Pennsylvania, states that the President needs to win again for his reelection campaign. The intent of the move was to make those industries competing with China more profitable and to keep those workers employed so they will vote for him again. However, the past year has shown that the people this hurts are more abundant than those it helps so in my opinion it is likely the President will reverse course whether China has sat down to negotiate or not.
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