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TARIFF-IED: United States and China

The United States and China are in a trade war. What does this mean for American businesses and consumers? How will these tariffs potentially unknit the global economy?

Article by Matthew Rooney August 26, 2019 //   3 minute read

Transcript:

The United States and China seem to be embarking on a full-blown trade war. The United States has been levying tariffs on Chinese imports over the past year or so. China has retaliated with tariffs to counterbalance or countervail, and the United States has retaliated to the retaliation right up until last weekend or just a few days ago where the Chinese announced tariffs on a wide array of U.S. products and the administration announced that it would retaliate. So, the administration has embarked on a course of trying to pry open the Chinese market to try to secure fairer treatment for American goods and services in China. That's a correct and necessary and in fact, imperative goal and has chosen this tariff, this tit for tat tariff war as its principal tool.

So we will see over the next several months as businesses adapt. Businesses, both US and other businesses will have to adapt, and they'll change where they procure, and they'll change where they buy the things that they need, and that will have cost implications, and that will start to work its way through to the consumer. And then we'll see how the government's continue to respond.

Both governments are calculating that they have the stronger hand, that the U.S. government seems to believe that the Chinese government wants access to our markets so badly that they're going to back down. The Chinese government seems to believe that it has a deeper political support domestically, and it, of course, isn't facing an election in 11 months time. So, we'll see what the end result is. In general, raising tariffs on trade is not a good idea. It raises the cost of not just trade but other things, and it tends to unknit the global economy in ways that will prove to be costly over the long- term for American consumers and for consumers all over the world, and therefore it's unlikely to be the best approach.