Opinion
9 Nov 2018 01:14pm

Debate: Is the US worse off after Trump’s trade tariffs?

We asked a number of experts, professors, business groups and firms if America will suffer more than China as a result of Trump’s trade tariffs

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Caption: Will America suffer more than China as a result of Trump’s trade tariffs?

Tony Watima

Economist based in Kenya

“America will bear the brunt of the US-China tariff. The Trump administration has missed the point that the modern day production supply chains have gone global and therefore imposing tariffs doesn’t hurt China alone, but also US producers at home.

“The majority of goods China exports to the US are capital goods, raw materials of capital goods and industrial inputs, which China dumps at a cheaper price compared to competitors. US producers have relied on these imports to improve on their profit margin and be more efficient. Therefore, US producers are one of the major losers in this tariff war because it raises their cost of production, and this will ultimately be passed to the US consumer.

“Looking at the US good s China has imposed tariffs on, in a retaliatory move, they are mostly consumption goods, many of them agricultural. For agricultural goods, China can easily find other markets – especially developing economies trying to industrialise their agricultural sector – to serve local demand for agricultural goods that were being imported from the US. China has already offered African farmers who would like to export soya beans duty free access to the Chinese market, a market that was being serviced by US farmers.”

TJ Cox

Democratic candidate for California’s 21st congressional district

“As China and Trump continue an unnecessary trade war, Valley families are caught in the middle. We need trade policies that support our local economy and make us competitive on the global market. We also need a rep who will stand up for the Valley.”

Mary Geren

 Candidate for US Congress South Carolina Third District

“Again we see the damaging economic effects of tariffs and the unnecessary US/ China trade war. Plant workers, farmers, and most Americans don’t have the luxury of @RepJeffDuncan’s ‘wait and see’ plan. We need leaders who fight every day for American workers.”

Lucy Harding

Head of supply chain and procurement at recruiters Odgers Berndtson

“We find and advise top leaders, so we listen to their concerns. Issues impacting supply chain are high on the list. Global geopolitics have made effective global supply chain management a top board-level issue. “At a recent event we hosted, over 75% of 100 top chairs and chief executives expressed concern about tariffs, with 17% “extremely concerned”.

Leaders in financial services and industrials are more anxious than those in professional and business services. A similar proportion (78%) see positive opportunities from the rise of China. “Protectionism and tariffs are clearly difficult for business and increase cost pressures. This is good news for professional heads of supply chain management, but US-based companies are in the eye of this storm. However, in a global marketplace the losses in one market from tariffs and trade constraints may, as these views of UK bosses suggest, benefit those in another.”

Pedro Martins Jr

Emerging market strategist at JP Morgan, on downgrading China stocks

“A full-blown trade war becomes our new base case scenario for 2019. Total impact on China’s GDP growth is 1.0%, if China does not take countermeasures. There is no clear sign of mitigating confrontation between China and the US in the near term.”

William Mundell

Producer of documentary Better Angels on the US-China relationship, writing for the South China Morning Post

“China is transforming itself from the world’s largest factory to the world’s largest market. In the next five to 10 years, China’s middle class is projected to double to some 600 million people. “Even if China made no significant progress in opening up its markets, it’s almost guaranteed that China will become the number one export destination for the US, eclipsing both Canada and Mexico. For the first time in a generation, the US has the real prospect of winning back some of those jobs it lost to China. “China, not the US, holds the trump card. It could turn inward, developing its fast-growing internal market, which today represents just 40% of its gross domestic product, as compared to the US where consumer spending already represents 70% of GDP.”

Jorge Guajardo

Mexican Ambassador to China 2007-2013

“I’m just gonna put it out there: with a renegotiated NAFTA and the trade war with China, Mexico stands to benefit immensely. India’s [Subrahmanyam] Jaishankar told me about 19 months ago that Mexico would do well with Trump. I dismissed him immediately. Now...”

Linda Yueh

Economist, author of The Great Economists: How Their Ideas Can Help Us Today

“Tariffs are likely to economically damage both countries. Higher taxes on half of Chinese imports will raise prices for producers and consumers. America’s economy depends significantly on consumption. Higher consumer prices on Chinese-made products will dampen some of the hard-won income growth of recent years. For producers, higher prices on intermediate goods and raw materials, including steel and aluminium, will squeeze margins in supply chains.

“Higher prices on American imports will also affect Chinese consumers, but China imports less from the US, so the impact will be less encompassing. But higher taxes will also raise costs for Chinese producers which import intermediate inputs from America. What is more economically damaging will be investment restrictions. For instance, the inability of Chinese firms, such as telecoms giant ZTE, to access Silicon Valley technology led to it becoming nearly inoperable. This affects China’s Made in 2025 strategy, which aims to technologically upgrade its production to achieve prosperity.

“It’s difficult to say which country will be worst affected. Both economies will be damaged – albeit in different ways – by the on-going trade war.”

Nicole Bivens Collinson

President of Sandler, Travis & Rosenberg’s international trade and government relations group

“The US will suffer more than China. The US has embraced global value chains, meaning not only finished products are being imported but necessary components for further manufacturing in the US, as well as US content that is exported to China for further manufacturing. All of the players involved in this chain will be negatively impacted.

Further, China has retaliated and will continue to retaliate as the US imposes more duties. “While China cannot match product for product, it is a master at erecting non-tariff barriers (NTBs). These have a greater negative impact on companies than tariffs. If China resorts to NTBs, the tariffs will remain in place for years.

We are already seeing US producers increasing their prices due to demand and capacity. Other countries will follow suit, knowing global prices are increasing. Whether sourcing from China or US or another country, the US businesses and consumers will be hardest hit."

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