“I probably just lost $50,000. That’s my first house.” So said Illinois farmer Aaron Wernz, speaking to a Wall Street Journal reporter after China announced it would put a hefty 25 percent tariff on U.S. soybeans, which Wernz grows. The tariffs will raise prices to Chinese buyers and cut their purchases, which could cost American soybean growers $1.7 billion.
Until now, President Trump’s tirades about big trade deficits and bad trade deals amounted mostly to crowd-pleasing rhetoric. Now the words have turned to action, and the action has spurred counteractions – and the perils of this approach loom like a massive thunderhead.
Last month, the administration announced it would put new duties on all imported aluminum and steel, before deciding to exempt Canada, Mexico, the European Union and other countries. The chief target was China, which answered with tariffs on U.S. pork, fruit and nuts.
Then the Trump administration announced 25 percent duties on more than 1,300 Chinese products worth some $50 billion. Beijing countered with equal levies on $50 billion of 128 U.S. goods, notably soybeans, corn, cotton, chemicals and cars. There may be more tariffs to come.
OVERREACTION TO TECHNOLOGY GRIPES
The latest ones haven’t gone into effect yet, and with any luck, both sides will find a way to defuse the conflict before it really gets going. If the U.S. and China continue to escalate, American consumers, corporations and farmers all stand to lose big. Illinois – which grows more soybeans than any other state and more corn than any state but Iowa – is especially at risk. So, potentially, are other Midwestern states that specialize in exporting manufactured and agricultural goods. Thousands upon thousands of Midwest jobs rely on this region’s robust export economy.
And what’s the possible upside for America? The president, who lacks a basic grasp of the value of international commerce, resents any trade deficit. But his aides say the main goal is to force China to abandon unfair practices such as the forced transfer of American technology by companies doing business there.
The complaint is valid, but a trade war would be a reckless overreaction. The best way to curb illegitimate practices is through negotiations that involve give and take among the parties. Trump missed a great chance when he walked away from the Trans-Pacific Partnership, a 12-nation deal that would have slashed tariffs throughout the region – and put strong pressure on Beijing, which chose not to participate, to change its ways.
SLOW BUT STEADY PACE LIKELIER TO PAY OFF
China was forced to make big reforms to gain admission to the World Trade Organization in 2001, and it is subject to penalties when it violates WTO rules. But if those rules have been inadequate to combat Chinese abuses, as many American companies attest, then the U.S. ought to be leading the charge to reopen talks to tighten them.
That course doesn’t make for thunderous applause at political rallies. It can be time-consuming. But it carries far fewer risks, and it has repeatedly succeeded in knocking down trade barriers and generating prosperity.
Trade wars, by contrast, are sure to cause economic harm in the short run – including higher prices to consumers, lost sales to farms and factories and a drag on the U.S. economy. And there is no guarantee such a fight would solve the problems that led to it.
That dire outlook, unfortunately, is what now looms ahead. “We were hoping it was just brinkmanship and cooler heads would prevail,” Illinois hog farmer Brian Duncan told the Chicago Tribune’s Greg Trotter. “But instead, some of our worst fears seem to be coming true.”
Sometimes, a little brinkmanship is useful in trade disputes. But nobody benefits from going over the brink.
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