Trump escalates trade war with China
San José, CA – On Thursday, July 31, President Trump tweeted that he would be imposing new tariffs, or taxes, on the $300 billion of Chinese goods not covered by his 25% tariffs. U.S. stocks took an immediate dive, giving up all of their 300-point gain to drop 280 points for the day. They continued to fall on Friday, leading to the worst week for U.S. stocks all year.
Despite what Trump says, tariffs are taxes that are paid by U.S. importers. Up to now, most of the Chinese goods placed under heavy tariffs have not been consumer goods. But the new tariffs mainly hit consumer goods such as cell phones, consumer electronics, toys, and baby supplies. U.S. workers could see higher prices going into the upcoming holiday season.
Trump also claims that his goal is to bring down the U.S. trade deficit, where the U.S. imports more goods and services than it exports to other countries. But despite his tariffs, the U.S. trade deficit grew to a record dollar amount last year, as other countries fought back and retaliated against U.S. exports.
The U.S. and China had just met to discuss the trade war and had agreed to meet again in mid-September. By placing tariffs on even more Chinese goods, Trump is trying to bully China into changing its socialist economy. While his bullying tactics can work with smaller economies like Mexico and Guatemala, China is the world’s second largest economy and has had an independent leadership since the Chinese revolution in 1949.
The new Chinese ambassador to the United Nations, Zhang Jun, said, “China’s position is very clear that if the U.S. wishes to talk, then we will talk, if they want to fight, then we will fight.” With the Chinese leadership beginning a two-week annual policy conference, their specific response may take a few weeks. But the trade war is likely to get worse in the coming weeks.
Trump’s trade war is just one of the factors weighing on the world capitalist economy. The European economy is already in the doldrums, and worries are growing about the impact of a no-deal Brexit in October. The Japanese economy is also slow, and Japan has copied Trump by restricting exports of chemicals used in making semiconductors under the guise of “national security”. Here in the United States, business investment and construction are slowing, one of the most sure-fire warnings that a recession is on the way. While the U.S. economy is relatively strong, with low unemployment, it is harder and harder to see how it can continue to grow with one problem after another cropping up.