Guest Editorial: Trade war with China: free trade better than tariffs
Just a week ago, a leading China scholar described the saber-rattling in Washington and Beijing over trade and tariffs as little more than a slap-fight.
But trade wars, like shooting wars, have a way of escalating.
And the skirmish between the U.S. and China threatens to get out of hand if the pattern of tit-for-tat trade sanctions continues.
Most experts say a full-scale trade war between the world's two largest economies would punish American businesses, farms and workers. That may explain why U.S. stock markets have retreated each time trade tensions have ratcheted up.
Democrats and Republicans don't agree on much, but both parties generally favor free trade. President Donald Trump, on the other hand, has made no secret of his protectionist views, during his campaign and since taking office.
So it shouldn't have surprised anyone when he started announcing new tariffs.
And it isn't surprising that China is responding with its own sanctions.
In March, Trump announced a 25 percent tariff on all imported steel and aluminum, subsequently exempting Canada, Mexico and the European Union. That left China, which responded with its own tariffs on several U.S. exports, including fruit, nuts and, of particular concern in this region, wine.
Last week, the president said he would impose import duties of 25 percent on 1,300 Chinese products worth about $50 billion. China responded with new tariffs on 128 U.S. products, also worth about $50 billion. A day later, Trump threatened to up the ante to $100 billion. Expect China to respond in kind.
As columnist Paul Krugman, a Nobel Prize-winning economist, pointed out on these pages Sunday, the U.S. has legitimate grievances with China, but Trump appears to be fixated on a trade deficit that is of little consequence in a global economy.
In other words, the commander in chief is gearing up to fight the wrong war.
Even so, the casualties would be real.
A steep tariff on imported steel would drive up the cost of automobiles and other manufactured goods for consumers while making American products less attractive in other countries. It also would drive up the cost of infrastructure repairs and construction of apartments and other buildings with steel frames.
Expect U.S. steel and aluminum makers to raise their prices to match the costlier imports.
If you doubt that, consider what has happened since the U.S. imposed new tariffs on Canadian newsprint, acting on a request from a New York investment company that owns a small paper mill in Washington state. The tariff could reach 32 percent, and U.S. suppliers already have raised prices in response to rising demand for a largely fixed supply.
At The Press Democrat, like most newspapers, newsprint is the second largest expense after payroll. Our paper comes from domestic sources, but the price went up in April, with another increase already announced for May for a total of 9 percent, with additional increases likely to come. The results include few pages in the paper and the loss of features, most notably the daily TV schedule.
That's just one example of how trade barriers end up hurting consumers. Count on even more pain if the U.S. and China stay on their present path toward an out-and-out trade war.
Santa Rosa (California) Press Democrat, April 10