Trump’s Trade War Could Become Permanent

JM Ashby
Written by JM Ashby

It's still incredibly difficult for me to see Chinese and Trump regime officials reaching any kind of substantive trade agreement that includes even half of what the two sides want, but I'm not an expert.

With that said, actual experts who spoke to Reuters say they're starting to believe that the bulk if not all of Trump's tariffs on Chinese goods may be permanent.

It all comes down to the fact that the tentative deal the two sides have supposedly agreed to will not fundamentally change anything.

“The problem for the U.S. is, if this is where it lands, are we really going to have substantial tariffs on China indefinitely?” [former U.S. Treasury undersecretary of international affairs Nathan Sheets] said, currently chief economist for asset manager PGIM Fixed Income.

Trade experts and China market analysts say chances are high that Washington and Beijing will fail to agree on any specifics - as happened in May - in time for a mid-November meeting between Trump and Chinese President Xi Jinping. Even if they do, they say, China will be less inclined to make the concessions needed for a more difficult “Phase 2” of negotiations, choosing instead to live with substantial U.S. tariffs. [...]

Friday’s truce “just kicks the can down the road, which is good enough for both sides for now,” said Scott Kennedy, a China trade expert at Center for Strategic and International Studies. Eventually, he said, “the Trump administration may run out of road, and China Inc would not have been constrained.”

In other words, even under the best case scenario lined out in the tentative agreement -- with Trump pausing his tariffs and China purchasing more farm goods -- that still leaves us with tariffs on about $400 billion in Chinese goods that are on the books today.

If that's "Phase 1" of the agreement, and if that phase does not include structural reforms or an agreement to roll back tariffs that have already been imposed, there likely never will be a "Phase 2."

In that context, the first phase should also probably be seen as the final phase before the 2020 election.

If we assume that the bulk if not all of Trump's tariffs will still be on the books when the next president takes office, what exactly will they be dealing with?

They will inherit a protracted trade war that has not benefited the economy in any way and has, in fact, dragged the economy down for two years. Whoever the Democratic nominee for president is will probably be forced to talk tough on the campaign trail, but the truth is there will be a great amount of pressure to put the trade war behind us if they win the election. We could be in or close to a recession by January of 2021 and Trump's trade war is one less thing we need hampering any effort to recover.

Given that Trump's trade war started in earnest when he first imposed tariffs on foreign solar panels in early 2018, it may be fair to say that his war has already become more or less permanent. Time flies when you're destroying the systems of global trade that have been in place since the end of the second world war.

  • muselet

    Time flies when you’re destroying the systems of global trade that have been in place since the end of the second world war.

    Perhaps if young Donald Trump had paid some attention in class, he might have learned why those systems were put in place. He might even have learned about what caused—and what exacerbated—the Great Depression.

    Instead, Trump took up space at prestigious schools and learned nothing except how to break things.

    Future historians will look back on the Trump Era with a mixture of horror and disbelief.


    • If any of the historians survive.

  • gescove

    Same as it ever was. Democrats will get to clean up the mess after Republicans tanked the economy.