By Clay Chandler, Eamon Barrett, fortune.com
President Trump raised the stakes in the U.S. trade war with China yet again yesterday by threatening to slap tariffs on more than $500 billion worth of imports from that nation. The figure is roughly double the value of Chinese products on which Trump has already imposed or threatened to impose tariffs–and nearly equal to the total value of goods and services America purchased from China last year.
“I’m ready to go to 500,” the president declared in an interview with CNBC’s Joe Kernen. Trump called the move the “right thing to do for our country,” adding, “We have been ripped off by China for a long time.”
Those remarks were the latest sign (as if we needed further evidence) that trade negotiations between Washington and Beijing have collapsed. The White House says there are no plans for the two countries to discuss trade issues at this weekend’s meeting of G20 finance ministers in Argentina. Many analysts now fear there will be no significant movement towards resolution until after U.S. mid-term elections in November.
Trump economic adviser Larry Kudlow this week laid blame for the stalemate on the Chinese president. “The problem here is Xi,” Kudlow told Axios. “He doesn’t want to move, and they’ve offered the U.S. absolutely…no options regarding the issue of [intellectual property] theft and forced technology transfer.” Chinese foreign ministry spokesman Hua Chunying bristled at that suggestion, deeming it “shocking” and “beyond imagination” that a Trump advisor would make such “bogus accusations.”
As the trade war escalates, so have analysts’ estimates of potential economic consequences. Last week I noted UBS’s volte face from blasé to bearish. This week brings a JP Morgan assessment, cited in this Financial Times editorial, suggesting Trump’s tariffs don’t pose significant risk for the global economy. The bank concludes the combined impact of the $500 billion in tariffs Trump has threatened against China, the additional $275 billion in tariffs the White House is said to be mulling on auto imports, and the likely retaliation to those measures, would only reduce global growth 0.25 percentage points. The FT dismisses that view as “far too complacent,” faulting it for failing to account for the toll a full-blown trade war would take on business sentiment.
The International Monetary Fund warned this week that a trade war could lower global growth by as much as 0.5%, or $430 billion, by 2020, with America “especially vulnerable.” Meanwhile, a host of recent reports suggest U.S. producers—including makers of American whiskey, soy bean farmers, lobster fisherman and cranberry farmers —already feel the pain.
Also yesterday, Trump took to Twitter to drag the Federal Reserve into the trade brawl, assailing the U.S. central bank for its apparent reluctance to goose U.S. exports with a weaker dollar. The Wall Street Journal’s Grep Ip explains why Trump’s anti-Fed outburst is in no one’s interest, least of all his own.
China was a hot topic at Brainstorm Tech in Aspen this week. New York Times columnist Tom Friedman allowed that he actually agreed with Trump on the need for the U.S. to get tough with China on technology transfer and intellectual property issues. But he expressed bafflement at the “madness of Trump’s method”: If the president really wanted to put pressure on China, why would he tear up the Trans-Pacific Partnership and pick fights with virtually all America’s allies and other trade partners at the same time?