Mike Norris, Co-Editor, The American Dossier
The trade war between the world’s two largest economies continues to intensify, with no end in sight.
Last Friday, the Office of the U.S. Trade Representative published a $200 billion list of Chinese goods that would be hit with new tariffs. The announcement prompted quick retaliation by Beijing. On Monday, China's State Council Customs Tariff Commission announced that it will be imposing its own tariffs of up to 25% on $60 billion worth of U.S. products.
The economic tit-for-tat is the latest development in trade talks between China and the U.S. that have affected a wide range of businesses, from local farms to multinational corporations.
Following through on an early campaign promise, the Trump administration has taken an aggressive stance towards China, which has been the beneficiary of unfair trade practices and intellectual property theft. In addition to the tariffs, the White House is placing restrictions on investment and on visas for Chinese nationals.
These moves are being used as leverage to force Beijing to make changes, such as opening its markets to American companies and ending the practice of requiring businesses operating in China to hand over technology.
Thus far, the U.S. has placed tariffs on $250 billion worth of Chinese products. The penalized items range from paint brushes and paint rollers to clocks and watches. The list includes a wide range of sporting goods, from baseballs to fishing reels. And it includes agricultural products, from livestock to dairy, plants and vegetables. Food staples such as rice and tea are on the list.
But the actions come at a cost for American agriculture and manufacturing, which are facing potentially devastating disruptions to their supply chains and cost projections. Economists say the trade war will raise costs for American industry, threatening the agricultural and manufacturing jobs the President wants to protect.
Those higher costs will ultimately work their way through the supply chain to American consumers. As of Friday morning, companies like Wisconsin-based Husco International, a manufacturing company that makes parts for Ford, General Motors, Caterpillar and John Deere, now pay 25% more for parts imported from China.
Austin Ramirez, Husco International’s chief executive, said that these increased costs put American manufacturers at a competitive disadvantage. “The people it helps most of all are my competitors in Germany and Japan, who also have large parts of their supply chain in Asia but don’t have these tariffs,” Ramirez stated.
In retaliation, China has imposed its own tariffs on a wide list of products, including sorghum, soybeans, meat, whiskey, airplanes and cars.
China’s moves have caused deep concern among American soybean farmers. Before the trade war, China, the world’s largest purchaser of soybeans, was buying approximately $14 billion in U.S.-produced soybeans every year, almost a third of the American crop. China has now abandoned U.S. soybeans, in favor of a cheaper Brazilian product.
China is running out of retaliatory moves that they can take against the U.S., without hurting their own interests. Based on 2018 U.S. Census Bureau trade data, China only has approximately $10 billion of U.S. products remaining, on which they can levy duties on in retaliation for any future U.S. tariffs. The only other items Beijing could tax would be imports of U.S. services. The United States had a services trade surplus with China of $40.5 billion in 2018.
More likely, China will impose non-tariff barriers on U.S. goods, such as delaying regulatory approvals for agricultural products.
To minimize the impact of trade disruptions with the U.S., the Chinese government is recreating the old Silk Road. The initiative, known as the New Silk Road Strategy, was announced in 2013 by President Xi Jinping.
According to the Belt and Road Action Plan released in 2015, the initiative will create a double trade corridor, that encompasses land routes (the “Belt”) and maritime routes (the “Road”). Through infrastructure investments, China is reopening trade channels and improving relationships with its neighbors in the west, most notable Central Asia, the Middle East and Europe. Since the program’s launch, it has attracted 126 partner countries and 29 global organizations.
The world will be closely watching next month’s G-20 summit for signs of a trade agreement between China and the U.S. At the previous G-20, President Trump and President Xi agreed to a trade ceasefire.
With the 2020 campaign season just around the corner, President Trump should be eager to end the market instabilities caused by the trade war. Although a former U.S. ambassador to China lists the odds of striking a deal at the G-20 “are about 50-50,” American farmers and manufacturers will be betting against the odds.
After serving as an Airborne Infantryman in the 82nd Airborne Division, Mike attended Florida State University, where he received his Bachelors Degree in Political Science and George Washington University, where he received his Masters in Political Management.
Since 2004, Mike has worked in the Florida Senate, where he was one of only two Chief’s of Staff under 30 and in the Michigan Senate, where he served as the Legislative Aide to the Assistant Minority Floor Leader. The 2018 election cycle was Mike’s eighth as a Political Consultant.
Mike previously served as the Secretary and Vice President of the Tampa Bay Young Republicans, Regional Vice Chair for the Florida Federated Young Republicans and attended the 2012 Republican National Convention as an Alternate Delegate. He currently lives in Grosse Pointe Woods, Michigan, with his rescue Pit Bull, Ike.