US, China on the verge of an unwinnable trade war


When President Donald Trump announced higher tariffs on $200 billion in Chinese goods, he boasted that China would cry uncle and agree to all his demands in the trade talks – which are now suspended.

Indeed, the president was so sure of having the upper hand that he let it be known the U.S. intends to move forward with new tariffs on all Chinese imports. That would mean another $325 billion in taxes on goods made in China.

But rather than throw in the towel, the Chinese responded by raising tariffs on $60 billion in American-made goods.

According to CNBC, as of June 1, Beijing will increase tariffs to as high as 25 percent on more than 5,000 products. Duties on some other goods will increase to 20 percent. Those rates have been 10 percent or 5 percent. Products hit by the 25 percent tariffs include animal products and frozen fruits and vegetables, CNBC reported. Chemicals are among goods to be taxed at 20 percent.

Nonetheless, Trump insists the U.S. has the upper hand because China’s economy has stalled and cannot absorb a disruption in trade with the U.S.

On Tuesday, he described the trade war as a “little squabble” that will be resolved.

“We are, again, in a very, very strong position,” the president said. “They want to make a deal. It could absolutely happen. We have a very good dialogue. We have a dialogue going. It will always continue.”

While we have strongly endorsed Trump’s crackdown on countries that have been dumping steel, aluminum and other products on the U.S. at artificially low prices, we have cautioned against the administration adopting a scorched-earth policy against its trading partners.

We have applauded Trump for focusing on China’s unfair trade practices that enabled it to maintain a $419 billion trade surplus with the U.S. last year, but we have also advised a measured response.

That’s because an all-out trade war will hit Americans in their pocket books.

Indeed, farmers are already suffering the brunt of the ongoing battle.

Family farms

The Trump administration is aware that family farms are most at risk and has pledged $15 billion in aid.

According to CNN, a Republican lawmaker who speaks with the White House about agricultural issues said the administration has not provided clarity on how it plans to pay the farmers.

“Fifteen-billion dollars sounds good, but where is it coming from? He [Trump] hasn’t asked Congress,” the lawmaker said. “Agriculture is collateral damage in this deal.”

The member of Congress told CNN that farmers “are starting to freak out a little bit.”

Farmers say there has been a rise in suicides since China imposed tariffs on farm products.

The fallout from the trade war is also affecting Americans who are in the stock market, especially those with 401(k) retirement accounts.

On Monday, the Dow and S&P 500 fell 617 points and 2.4 percent, respectively, their worst performances since early January. The Nasdaq dropped 3.4 percent, its biggest one-day loss of 2019.

On Tuesday, the Dow rose 207.06 points to 25,532.05, boosted by gains in Visa and Boeing shares.

The impact of the trade war will be felt throughout the U.S. economy, which is why an agreement must be reached sooner rather than later.

On Tuesday, Trump talked about U.S. economic growth as he toured a newly opened liquid natural-gas facility in Louisiana.

It is worth noting that China has been on track to become the largest importer of U.S. liquid natural gas, but Beijing has increased tariffs to 25 percent on the U.S. energy product, according to CNN.

Thus, there are concerns of a slowdown in demand.

Trump cast the issue of energy independence as one of national pride and said the U.S. would no longer be disadvantaged by other countries, CNN reported.

“We don’t need to be ripped off by the rest of the world because those days are over,” the president said.

We couldn’t agree more, but we are worried that the ongoing trade war will ultimately hurt the U.S. economy.

A trade delegation is expected to travel to Beijing in the coming weeks, but it’s not known what Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer are hoping to accomplish.

Trump is to meet with Chinese President Xi Jinping at the end of June at the G20 summit at Osaka, Japan. Hopefully, the trade war will have ended by then.

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