President Donald Trump will approve a plan that will impose a 25% tariff on Chinese technology products, which is worth around $50 billion. From The Washington Post:
Although the import levies affect less than 10 percent of the $505 billion in Chinese goods that Americans buy each year, Trump’s new trade barriers mark a historic change after three decades of deepening ties between the world’s two largest economies.The administration initially said that up to 1,300 products could be hit with the tariffs, which American importers pay and pass on to their customers.
The move comes after Trump met with his “top economic officials.” The sectors hit by the tariffs include “aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles,” but not common purchases by consumers like phones and TVs.
From The Washington Examiner:
“My great friendship with President Xi [Jinping] of China and our country’s relationship with China are both very important to me. Trade between our nations, however, has been very unfair, for a very long time. This situation is no longer sustainable,” President Trump said Friday.”China has, for example, long been engaging in several unfair practices related to the acquisition of American intellectual property and technology,” he said. “These practices … harm our economic and national security and deepen our already massive trade imbalance with China.”
But before we freak out too much, we must remember that the tariffs won’t go into effect right away and Trump can still change his mind. From Politico:
The authorizing statute for the tariffs, Section 301 of the Trade Act of 1974, allows USTR to take up to 30 days to put the duties in place after a formal determination is published in the Federal Register. But there is a possibility that Trump could then delay the duties even further — for up to another 180 days, well past the midterm elections and into January 2019 — if USTR determines the larger talks with China are making substantial progress or that a delay would help bring about a satisfactory solution.
Chinese Foreign Ministry Spokesman Geng Shuang said that China will respond and do whatever it needs to do in order “top defend our legitimate rights and interests.” China already has “a list of $50 billion in U.S. products that would face retaliatory tariffs, including beef and soybeans, a shot at Trump’s supporters in rural America.”
Trump recently caused an uproar when he placed tariffs on steel and aluminum imports from Canada, Mexico, and the European Union. He’s saying this is all in need of “fair trade” and national security, but are tariffs really needed? After all, once upon a time, the right used to hate tariffs because the companies pass off the high prices to consumers.
David Harsanyi wrote an incredible article at Reason this morning that explains why these moves are awful. He dissected Trump’s top trade advisor Peter Navrarro’s piece at The New York Times and this part caught my eye:
When Navarro writes that G-7 nations’ trade practices “contribute to America’s more than $500 billion annual global trade deficit in goods and services,” he means American citizens purchased goods they prefer from other countries. Sometimes these products are completely foreign-made, and sometimes they’re partially foreign-made, but Americans always get something in return. As economist Milton Friedman argued long ago, the real gain from international trade is not what we export but what we import.More importantly, one reason the United States is running a trade deficit is that we are wealthy and larger and can spend more on foreign-made goods and services than others can spend on U.S.-made goods and services. For example, China, which many Americans wrongly believe is an economically comparable power, boasts of a $6,894 gross domestic product per capita, compared with our $52,194.Navarro correctly claims that cars made in Germany and elsewhere in the European Union are subject to a 2.5 percent tariff, while the EU tariff on American cars is four times as high. “No wonder,” says Navarro, “Germany sells us three cars for every one we export to Germany.”Well, once we consider that Germany has a population of about 83 million and ours is more than three times that number, it makes a lot more sense. But protectionists need to exaggerate the unfairness to allow us to play victims. In any event, if our trading partners are behaving as poorly as Trump claims (and that’s arguable), what would American consumers gain from paying more? Would the Germans buy more Fords?
For example, U.S. builders claim that the latest tariffs from Trump are adding money to new home prices. Robert Dietz, the chief economist of the National Association of Home Builders, mentioned the high costs of materials bringing down the industry like the “spike in lumber prices,” which has gone up 62% since January 2017. Dietz said builders receive “a third of the lumber we use in the U.S. from Canada.” This has bumped home prices up by $9,000.
[Featured image via Wikimedia Commons]
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