On the eve of the implementation of United States tariffs against steel and aluminum imports from Canada, Mexico, and the European Union (EU), many political and financial experts are speaking out against the planned sanctions.
According to Tom Donohue, the president and CEO of the Chamber of Commerce, President Donald Trump’s decision to waive the tariff exceptions could potentially lead to the loss of 2.6 million American jobs. Donohue released a statement in a memo on Thursday, citing numerous outside studies to back up his projected data.
The job losses will come from a combination of the negative effects of the strict tariffs as well as a possible withdrawal from NAFTA, the long-standing trade agreement between the US and neighbors Mexico and Canada. The death of NAFTA could lead to the loss of as many as 1.8 million jobs alone.
In addition to today’s announcement that the US will be reinstating tariffs against three of the country’s biggest trade partners, the US is also involved in an escalating trade war with China that shows no signs of peaceful negotiation any time in the near future. Donohue used the memo to warn that tariffs waged against China could cost the US an additional 134,000 jobs plus 470,000 jobs lost to the steel and aluminum tariffs and an extra 157,000 jobs lost due to possible automobile tariffs.
Despite this report, the White House continues to assert that the tariffs will boost domestic industries while punishing other countries for unfair trade practices.
President Trump is playing with economic fire, and he thinks he’s not going to get burned. Last week, the Trump administration sent an economic delegation to China to make a deal. His trade sanctions started an economic sparing match, and that’s not good news for American consumers. The delegation wants China to reduce the trade deficit by $200 billion over the next two years. The trade deficit was $336 billion in 2017. And the U.S. delegation also asked China to stop taking U.S. intellectual property from the U.S. companies who sell that property in China. If China does what Trump wants, he will take away his tariff threat. That threat impacts about $50 billion worth of Chinese goods.
That sounds like an economic hardball at its finest, according to a BusinessInsider.com article. The head of the White House National Trade Council, Peter Navarro, is in charge of the negotiations. Navarro is not as cooperative and he is not as fair when it comes to negotiating as Larry Kudlow, Trump’s top economic advisor. The Chinese rejected Navarro’s offer. According to associate director of the Cato Institute’s Center of Trade Policy Studies, Simon Lester the delegation knew the Chinese would reject a deal like that.
Lester thinks the Trump administration is putting on a show so the Chinese will turn down the offer and Trump will enforce his tariff plan. There’s a big difference between what China will do and what the U.S. wants from China. And the Chinese are not backing down. A trade war with China will fuel inflation in the U.S., according to some economists and U.S. consumers will pay a heavy price for wanting to buy China products that other countries can’t produce.
Major financial officials in Asia are nervously watching recent trade tension between China and the United States brought on by President Donald Trumps proposal to levy stiff tariffs on Chinese exports.
If the Chinese economy ends up being negatively affected by a trade war with the U.S., China’s trading partners in developing Asian countries may also suffer. That’s why global economic analysts will be closely watching a meeting between U.S. and China negotiators in Beijing this week.
The major players in the meeting will be U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He. They will discuss an array of trade issues including what to do about tariffs. President Trump has made a significant issue about the U.S. trade imbalance with China.
Another factor that has China and many Asian countries on edge is the possibility of interest rate hikes in the U.S. by the Federal Reserve. Indonesian Finance Minister Sri Mulyani Indrawati said that higher interest rates in America ripple across the world with a “domino effect.”
U.S. Commerce Secretary Wilbur Ross will also play a major role at the Beijing meeting. He has made a point to lower expectations for any kind of major deal. Chinese officials have already been drawing some definite lines in the sand. For example, one Chinese minister said that his country “will not negotiate away its core interests” and will not accept “preconditions on issues.”
If the new U.S. tariffs get a green light from the White House, they will take effect in June after a 60-day consultation period.
After months of back and forth and threats from both sides, representatives in China and the United States are meeting this week to discuss strategies to avoid a brewing trade war between the two countries. The US delegation arrived in Beijing on Thursday for two days of talks in an effort to smooth things over between the world’s two largest economies. President Donald Trump sent two his top advisers to the negotiations, choosing Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer.
Earlier this year, Trump threatened a series of tariffs on imported Chinese goods and China responded with of list of their own tariffs equalling billion of dollars on both sides. In addition to deescalating tensions, the US delegation hopes to make progress in a few other key areas. US officials are hoping to convince China to buy more US goods in an effort to cut the $375 billion deficit. The goal of the talks is to come out of the deal with an agreement by China to purchase an additional $50 billion worth of goods per year. The US also hopes to gain access to more foreign markets through negotiations with China. Lastly, American companies operating in China want Trump to pressure the Chinese government to do more to protect the integrity of their intellectual property. Trump has previously cited this theft and counterfeiting of goods as a major reason for imposing the tariffs.
Over the past few decades, the overall international economy has become far more globalized than ever before. Today, even countries that are not necessarily on the same footing when it comes to a variety of different social and political issues manage to find a way to engage in trade. Because of this, maintaining a proper balance in international trade is extremely important. While the United States and China have done a good job of maintaining a good trade relationship for a long time, it has gone through a lot of strain over the past few weeks (https://www.theguardian.com/business/live/2018/apr/04/china-us-trade-war-tariffs-wpp-markets-eurozone-jobs-business-live).
Over the past few weeks, president Donald Trump has made a variety of different claims discussing tariffs that he would like to place on China for imports. These tariffs have ranged significantly and in some cases are estimated to be as high as 50% for certain goods. While he has reportedly done this to try and encourage people to buy American products, it has been very damaging to the trade relationship with China.
Now that China has had a chance to consider the tariffs that the United States is placing on Chinese imports, China is also considering placing tariffs on items at the United States exports. Overall, China is considering placing a 25% global tariff on all items that are imported from the United States. This impact could have a major affect on a wide variety of companies and could shake up the entire global economy. Since these claims, global stock markets have fallen considerably.
Trade tension between China and the United States is growing. Trump administration officials are increasingly expressing their criticism of China’s trade policies. China is sending Liu He, the country’s top economic policymaker, to Washington this week to smooth tensions between the two countries. Liu is making this trip before China’s congress conducts its annual meeting. Liu is expected to be named the next vice premier for financial and industrial policy for China at this meeting.
The Trump Administration and the Commerce Department both view steel and aluminum imports from countries like China as a national security threat. This is because China and a few other countries implement higher tariffs on their imports of American products than the U.S. imposes tariffs on the imports of products from these countries. President Trump and the Commerce Department are looking at ways to restrict these and other imports through higher tariffs. The Chinese government would prefer the status quo, but they are also ready for a trade confrontation.
In early February, the Chinese government sent its top diplomat Yang Jiechi to Washington to maintain the status quo and soothe the concerns in Washington. Nothing significant was accomplished with this visit. The Trump administration was already too focused on China’s military buildup and China’s growing trade surplus with the U.S. The large delegation Liu is expected to lead is an indication of Liu’s growing influence within the Chinese government. Experts believe Liu will eventually be the head of China’s central bank after the current central bank leader retires later this year.
In 2016 alone, the Chinese have imported $14 billion worth of soybeans from the United States, reports CNN Money in a recent article. Soybeans are just one example of the need for agricultural products in the Middle Kingdom. The large Chinese population of about 1.4 billion needs immense quantities of food.
Yet agricultural trade could be affected in negative ways. Last month, the Trump administration put tariffs on imported Chinese solar panels. Now, the White House is considering tariffs on imports of Chinese aluminum and steel. In response, the Chinese Commerce Ministry indicated that if this “affects China’s interests, we will take necessary measures to defend our rights.”
China is already investigating whether the Unites States is dumping sorghum, an agricultural product. When it comes to cultivation of sorghum, the American farmers are world leaders with 2016 production of 480 bushels.
Would the Chinese authorities give up on imports of American agricultural products when it comes to feeding the world’s largest population? This isn’t that likely. Still, it worries farmers, many of whom voted for Donald Trump.
Despite tough rhetoric, “nobody wants a trade war,” as William Zarit, chairman of the Chinese branch of the American Chamber of Commerce, has said.
What is likely is that the world’s two economies will both cooperate and trade with each other in the foreseeable future.
The White House, as well as previous administrations, have long been accusing China of unfair trade practices. And, to large degree, they were right. After steel and aluminum tariffs, there’s another issue: the trade secrets. Trump’s administration, CNN Money reports, has began an investigation about intellectual property theft by China.
There’s no doubt that copyrights are violated in China. American movies, academic textbooks, and music are widely copied. But now, the issue is even bigger. It comes to alleged high-tech theft. It’s not that American-made high-tech hasn’t been stolen before, but that it is being brought up with more stress now.
According to a report by Commission on the Theft of American Intellectual Property, America loses as much as $600 million a year because of intellectual property theft. Meanwhile, Chinese government wants the Middle Kingdom to transition from being a low cost manufacturer to high-tech innovative economy. For example, China is now working on developing electric cars and 5G mobile networks.
To becomes a high-tech economy, China needs a lot of know-how, so no wonder it is looking for it rather aggressively. Some foreign companies claim that they were forced to transfer their technologies in order to be able to operate in China.
The Trump administration can either complain with the World Trade Organization (WTO) or take a unilateral action. This can possibly lead to a trade war.
The Trump administration’s protectionist talks are a risk to the current bull market in stocks. According to MarketWatch, a recent report suggested that President Trump may seek withdrawal from North American Free Trade Ageement (NAFTA), a trading pact among the United States, Canada, and Mexico. A couple of months ago, Trump stated that the U.S. will not be taken advantage of anymore when it comes to trading in goods and services.
A couple of Canadian officials have admitted that Canada is becoming more convinced that the U.S. will seek to end NAFTA. But, if Trump wants to do it, it will not be that simple since the Congress needs to approve it.
Even an attempt to end NAFTA would bring great business uncertainty. After all, many American companies do business in Canada and Mexico. And this is cited as one of the major stock market risks in 2018. Already, Geopolitical Risk Indicator, run by Black Rock, is at its highest level since 2015.
If there’s a serious talk about ending NAFTA, it is likely to affect global trade in general. In the past, Donald Trump has criticized trading with China on multiple occasions. If there’s a trade clash between the United States and the Middle Kingdom, this is going to bring even more uncertainty to this bull market. With equities valued sky high, a major market correction could as well come this year.