After President Donald Trump tweeted Tuesday morning about important trade discussions the US is actually having with China, US markets plunged.
In his tweets, Trump dubbed himself a “Tariff Man” in reference to his use of tariffs as a negotiating tactic with the country’s largest trade partner. “the idea will always be the best way to max out our economic power. We are right right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN,” Trump said on Twitter.
Investors on Wall Street had been optimistic in which the US in addition to China were generating progress in avoiding a prolonged trade war when the two countries agreed to a 0-day halt to tariffs during the G20 summit.
Okay, right now let’s back up in addition to consider what a tariff even is actually.
the idea’s a tax a country imposes on an imported Great or service, generating them less attractive to consumers in addition to reducing consumption of those imports, often with the aim of generating domestic alternatives more appealing. Basically, the idea’s a protectionist tool in addition to deters trade. Trump is actually threatening high tariffs on Chinese imports to get China to boost its imports of US goods in addition to reduce the trade deficit.
Trump, who has been renegotiating with major US trade partners, imposed hefty tariffs on Chinese imports earlier This specific year.
Back when Trump announced the tariffs back in March, US markets also fell. Investors do not want a trade war, as the idea dampens consumption within the short term in addition to makes the idea harder for them to make long-term bets (companies have already announced layoffs due to the tariffs). China responded by placing its own tariffs on 128 US products in April. This specific set off a series of tit-for-tat tariff announcements by the two countries involving thousands of products.
Notably, American farmers were hit severely when China stopped importing their soybeans — soybeans were America’s top export to China last year, in addition to China bought about 60% of US soybeans.
In a survey by the University of Chicago earlier This specific year, not one economist said Americans could be better off as a result of the tariffs.
Here’s a timeline of how the trade war has played out.
When Trump said in his tweet, “We are right right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN,” he overstated the benefit of the tariffs so far.
The claim is actually technically true. The US has made more than $4.4 billion on the China tariffs This specific year, based on US Customs in addition to Border Protection calculations in October. So, yes, the idea’s billions, however the idea’s hardly generating America rich again. Consider for example in which the US exported $12.4 billion of soybeans alone to China last year, in addition to China has stopped buying US soybeans as a result of the trade dispute.
The tariff issue has surfaced again because Trump’s tariff on $0 billion of Chinese goods was scheduled to boost by 10% to 25% on Jan. 1 — however Trump in addition to Chinese President Xi Jinping agreed over the weekend to hold off on implementing brand new tariffs for 0 days.
Investors had been hoping for a significant truce on rising tariffs, however Trump in addition to Xi only managed to agree to a short-term halt, a Band-Aid at best. in addition to as more information arrived on the scene, investors decreasingly felt in which This specific was a promising outcome.
First, Trump’s chief economic adviser Larry Kudlow said in which the 0-day truce could start on Jan. 1, however the White House later corrected him, saying the idea started out on Dec. 1, meaning the 0-day deadline was approaching even quicker than investors had expected.
Then details emerged about what China was claiming to have offered the US, which was more modest than Trump had suggested.
The White House said: “China will agree to purchase a not yet agreed upon, however very substantial, amount of agricultural, energy, industrial, in addition to various other product by the United States to reduce the trade imbalance between our two countries. China has agreed to start purchasing agricultural product by our farmers immediately.”
The phrase in question here is actually “very substantial.” Chinese media reports following the meeting made no mention of such a concession by President Xi, saying only in which the two sides could work together to gradually reduce the trade deficit.
So while Trump tweeted Monday in which “farmers will be a very BIG in addition to FAST beneficiary of our deal with China,” in reality, This specific is actually not so clear.
Kudlow also suggested in which China could reduce its auto tariffs to zero, however again, the Chinese have yet to confirm This specific, as the Washington Post noted.
in addition to while soybeans in addition to agricultural exports are an important part of the equation, there are also questions about whether China will agree to import more high-value goods by the US, such as electric cars, aerospace, in addition to bio-medicine (as the Financial Times points out) if the idea also is actually trying to develop those industries domestically.
The big picture issue is actually in which investors’ skepticism is actually growing over Trump’s ability to negotiate a deal with China in which is actually beneficial to US companies or US consumers, in addition to the idea looks more in addition to more likely in which we’re headed toward an ongoing trade war.
This specific, along with rising interest rates within the US, has economists predicting an economic slowdown next year, despite indications otherwise by the Trump White House.