President Trump provoked a stock market selloff yesterday when
he told reporters that a China trade deal might not be completed until after next
year’s election. There are also possible new tariffs on France as well as
renewed import taxes on Brazilian and Argentinian steel. The combined
announcements of disappointing trade news on multiple fronts show that the trade
war is still going strong.
The president sent stocks tumbling yesterday when he told
reporters at the NATO conference in London, “A China trade deal is dependent on
one thing — do I want to make it.”
Mr. Trump added, “In some ways, I like the idea of waiting
until after the election for the China deal, but they want to make a deal now
and we will see whether or not the deal is going to be right.”
Back in October, President Trump
announced the deal with China, but a firm agreement has so far failed to
materialize. Last spring, a near-agreement
with China on trade fell apart when Mr. Trump, the self-proclaimed “tariff
man,” balked at removing the taxes on Chinese imports.
Now negotiators are racing a Dec. 15 deadline imposed by the
President last summer. At the end of next week, $300 billion in Chinese
products are scheduled for a 15 percent import tax increase. The December
15 tax increase includes consumer goods not previously subjected to
tariffs. These include technology products such as cellphones and computers
that will be in high demand in the weeks before Christmas.
Today, Trump Administration officials are working to undo
the damage of what they call an “off the cuff” remark. Officials cited by Bloomberg
downplayed the notion that trade talks were at an impasse and were hopeful for
a resolution before the scheduled tax increase next week.
Agriculture Secretary Sonny Perdue told CNBC,
“ Trump wants to conclude a deal that can be enforceable, that can be reliable
and be consistent with what the deal says.”
“We in agriculture are optimistically hopeful we can
conclude this,” Perdue said, adding, “Every farmer in America would rather have
trade than aid.”
The prospect of increased tariffs on Chinese imports comes
days after the president announced that he is restoring steel and aluminum
tariffs on Brazil and Argentina. In a tweet on Monday, President Trump accused
the two countries of devaluing their currencies, which he said was “not good
for our farmers.” Mr. Trump’s response was to restore the steel and aluminum
tariffs that were originally imposed in May 2018.
However, a devalued currency is a byproduct of a tariff war.
In an undated article on American
Express, Frances Coppola explained that, when the US places a tariff on
imports, companies in the targeted country receive fewer US dollars. Those
dollars would often be traded on monetary exchanges for the local currency.
Since fewer dollars are being traded for Brazilian reals or Argentinian pesos,
the demand for those currencies drops and their value goes down.
In reality, America’s farmers are suffering because China
retaliated to President Trump’s tariffs with retaliatory taxes on American
exports. These taxes hit American agriculture hard, but they benefitted
countries like Brazil. Where American farmers used to export to China, the
trade war has shifted Chinese agricultural purchases to countries that compete
with the US. Brazilian farm products have helped to replace American products
in China.
Finally, there is also the prospect of new tariffs on
France. Also on Monday, President Trump threatened 100 percent tariffs on a
long list of French products that includes wine, cheese, beauty products, and
handbags in retaliation for a French tax on digital services that impacts American
social media companies such as Facebook and Google. The new US tariffs would be
in addition to tariffs on $7.5 billion in European goods that the Administration
imposed in October.
“If anyone is going to take advantage of the American
companies, it's going to be us, it's not going to be France,” Trump told CNN.
France has pledged to “retaliate strongly” if the proposed
tariffs go into effect. So far, the Trump Administration has not released an implementation
date for the new tariffs.
With an impeachment already in process and presidential
approval underwater, the economy has been one of the few bright spots in President
Trump’s reelection campaign. Despite the risks of meddling with the economy, Mr.
Trump cannot help himself when it comes to tariffs.
For months, there have been signs
that the economy is slowing even though the stock market has continued to
climb and unemployment remains low. US manufacturing has contracted
for four straight months and the farm economy is being propped up by
government handouts. Businesses are hesitant to make plans and investments when
the president might tweet a drastic regulatory change at any moment. Many of
these warning signs can be traced to Mr. Trump’s arbitrary trade policies. If he
chooses to ignore them and is damaged in the 2020 elections by a weak economy,
he will have only himself to blame.
Originally published on The
Resurgent
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