September 2018 The Pros and Cons of the Trade War

September 2018 The Pros and Cons of the Trade War

The Pros and Cons of the Trade War

by Priya Trehan, WNDC Summer Intern

President Trump has engaged in a trade war with Asian and European nations, which in the United States is affecting diverse sections of the economy from farming to investors. In the U.S., many of our products are made in other places like China or the European Union. We are dependent on China as a source for low-cost goods and on the EU for cars and other items. China has turned to the European Union to form a front against Trump’s impulsive trade policies. A list of items that have been caught in the crossfire of the trade war include: solar panels, jeans, motorcycles, pork, soybeans, steel, aluminum, cars, insect repellent, tilapia, lobsters, cranberries, and cheese.

Pros:

  • Trump has said “trade wars are good, and easy to win.” If this proves true, it would be a positive.
  • Trump thinks this will improve U.S.’ bilateral trade balances with trading partners, which would be a positive.
  • The performance of U.S. markets relative to China and others is better.
  • Trump supporters feel that there would be benefits to the trade war in the long-term.
  • It would “rattle the market” but (Allen) It is doing damage to American economy for the past month, there has been nearly no dialogue between the U.S. and China, so things may be cooling down.
  • India could begin exporting more to China and the U.S., which would be good for their economy and provide us with another trading partner.

Cons:

  • $34bn of goods from China are affected and he has threatened to impose more barriers, at least up to $200 bn.
  • China put 25 percent duties on U.S. goods, which is roughly the same amount affected by U.S. trade barriers. This reduces demand for U.S. goods.
  • The threats to impose 20 percent on tariffs on cars from EU would make them more expensive for U.S. consumers.
  • Unpredictability is bad for the U.S. stock market and businesses.
  • It is doing damage to the American economy.
  • Trump is making threats, which are likely just threats; he won’t follow through with them. If he is just being aggressive, China can wait Trump out.
  • There is less of a demand for goods that are exported, so American workers are being laid off.
  • This is bad for farmers because it hits them directly and can cause them to have a loss for a year.
  • There is no sign the war is going to end soon; it has been almost six months.
  • China threatened “to hit $60 billion worth of U.S. exports to China with tariffs ranging from 5 percent to 25 percent. If China follows through on the threat, nearly 90 percent of all U.S. goods heading to China will be subject to tariffs.” (Bryan)

Trump may end the trade war sooner rather than later so the media don’t criticize him. Trump is not a fan of NAFTA, the agreement with Mexico and Canada, and does not like how the EU “put up barriers so that we can’t sell our farm products.” China has stolen intellectual property from America, which has prompted Trump to impose trade barriers with it.

The trade war started off slowly but has escalated over time. Now, with the trade war continuing, we could have a difficult time getting cheap goods from China if new tariffs are implemented. Despite the fact that Trump thinks we’ll win the trade war, since we are such a major global power, the trade war has had serious negative effects on this nation, including weakening our GDP and reducing our access to China’s products, which we depend on despite their lower quality, in many cases. The trade war shows no promise of ending.

— Priya Trehan, WNDC Summer Intern

Works Cited:
Bryan, Bob. “There’s No End in Sight for Trump’s Trade War with China Because ‘Both Sides Are More Inclined to Elevate Tension than Blink’.” Business Insider, Business
Insider, 5 Aug. 2018, www.businessinsider.com/trump-china-trade-war-tariffs-no-end-2018-8.
Davis, Bob, and Lingling Wei. “U.S. Pressures China With Punitive Trade, Defense Measures.” The Wall Street Journal, The Wall Street Journal, Dow Jones & Company, 1
Aug. 2018, www.wsj.com/articles/u-s-expected-to-unveil-25-tariffs-on-proposed-200-billion-in-chinese-imports-1533147299.
Duggan, Wayne. “Trump’s Trade Strategy: Pros and Cons.” Benzinga, Bezinga, 19 June 2018,
www.benzinga.com/analyst-ratings/analyst-color/18/06/11901629/trumps-trade-strategy-pros-and-cons.
Lowrey, Annie. “The Costs of Trump’s Trade War.” The Atlantic, Atlantic Media Company, 17 July 2018, www.theatlantic.com/business/archive/2018/07/the-costs-of-trumpstrade-
war/565208/.
Luskin, Donald L. “China Is Losing the Trade War With Trump.” The Wall Street Journal, The Wall Street Journal, Dow Jones & Company, 27 July 2018,
www.wsj.com/articles/china-is-losing-the-trade-war-with-trump-1532729725.
“US-China Trade War Can Make Indian Products Competitive, Says CII.
The Economic Times, The Economic Times, 6, August, 2018. https://economictimes.indiatimes.com/news/economy/foreign-trade/us-china-trade-war-can-make-indianproducts-
competitive-cii/articleshow/65280457.cms.