Does Donald Trump want to make stuff from China more expensive?
Donald Trump thinks China is pushing the US around, economically speaking. Beijing manipulates its currency and unfairly subsidizes domestic production to the detriment of American workers, in his view. So earlier this week he proposed doing something about it: Mr. Trump, , said that if elected he鈥檒l favor slapping a 45 percent tariff on Chinese exports to the US.
鈥淚 would tax China on products coming in,鈥� Trump told the Times. 鈥淚 would do a tariff, yes 鈥� and they do it to us.鈥�
This isn鈥檛 an entirely new idea for The Donald. When he considered entering the presidential race in 2011, he talked often about the need to threaten China with a tariff, which would make its goods more expensive and thus less competitive in the huge US market.
But then he was proposing a mere 25 percent levy. Now he鈥檚 gone huge, saying the number needs to be almost twice that big to get China鈥檚 attention. Is that really a good idea?
Trump appears to believe that the mere threat of a tariff will convince Beijing to be more accommodating to US economic concerns. But as any good deal artist knows, a threat is only effective if it is credible to the threatened. Credibility depends on the will to follow through. But what if China鈥檚 leaders decide to play it tough, and dare Trump to implement his tariff revenge? Then everything made in China 鈥� which means pretty much everything in many big box stores, including electronics 鈥� suddenly goes way up in price.
That might be a great way to make lots of voters unhappy very fast.
鈥淪o the average Joe gets to pay way, way more at the store and gets to worry about losing his job after China inevitably retaliates with tariffs of its own, shrinking foreign demand for U.S. goods? That sounds like a plan,鈥�
Furthermore, in the long run US retailers would be unlikely to turn to domestic producers to replace their now high-cost Chinese goods. They鈥檇 turn to other low-wage developing nations instead, like Vietnam.
The result would be what economists call a 鈥渄eadweight loss," .
鈥淭he basic economic argument is that tariffs have winners and losers, but the total amount lost would be greater than the amount gained in revenue and in protected industries,鈥� writes Campbell.
Whether President Trump would actually implement such a plan remains an open question. (The World Trade Organization may have something to say about it.)聽That鈥檚 not just due to the fact that problems look more complicated if you鈥檙e actually responsible for running the country. It鈥檚 also because the next US chief executive might be as interested in helping the Chinese economy as in controlling it.
One big cause of this week鈥檚 historic plunge in US stocks appears to be slowing growth in China. Beijing is trying to make its economy more focused on domestic markets. So far, that transition has proved a bit bumpier than anticipated.
