Amid an escalating trade skirmish with China, investors and business owners are becoming increasingly confident that separate commerce disputes with top U.S. allies will be resolved.
The Chinese government on Wednesday announced it would add a retaliatory 25 percent tariff on $16 billion in U.S. goods after the Trump administration promised the day before to impose identical levies on Beijing. The action was the latest in an escalating, tit-for-tat battle that experts say is unlikely to be resolved anytime soon, though the White House has made progress on other fronts in Trump’s trade war.
Negotiations with Canada and Mexico on an update to the North American Free Trade Agreement appear to be trending positively, despite the administration meeting with Mexico alone recently to restart talks. And after a visit by European Commission President Jean-Claude Juncker to the White House this summer, a new 25 percent tariff on automotive imports that would have hit Germany hard seems to be on hold.
“Trade tensions have escalated but they have also become more concentrated on the U.S.-China relationship, with other trade disputes taking a somewhat more constructive direction,” Goldman Sachs analysts wrote in a report on Wednesday. “This continues to suggest that the White House is likely to move forward with plans to impose additional tariffs on imports from China, even while the outlook for auto tariffs and NAFTA renegotiation has improved.”
Even business leaders who support Trump’s across-the-board tariffs on steel and aluminum imports believe key U.S. trading allies could soon see a reprieve.
“The tariffs will be just a negotiating chip in many situations, and I think that they’ll go away over time for those countries that treat us fairly,” Craig Bouchard, chief executive officer of aluminum manufacturer Braidy Industries, said in a recent interview.
[Related: ‘Point of no return’ draws closer in U.S.-China trade standoff]
The positive momentum is welcome news to Republican lawmakers, economists and other who have long warned that the various trade disputes could impact the growing U.S. economy and blunt the positive effects of the GOP-led tax cuts.
China, however, poses a significant challenge. The world’s second-largest economy — it shipped $505.5 billion to the U.S. last year — has signaled it’s ready to respond to whatever penalties the Trump administration chooses to impose.
Even as Caterpillar and other corporations raise prices to curb the looming impacts of Trump’s tariffs and smaller manufacturers fire workers and halt production, however, executives appear willing to give Trump latitude to address what they see as unfair trade practices by China.
“To a significant degree, the vast majority in the business community realize that this is a fight that has to be fought,” Russell Price, senior economist for Ameriprise Financial, told the Washington Examiner. “This isn’t going away until its resolved.”
Industries like technology have long criticized the stringent requirements Beijing imposes on companies as well as the country’s reputation for stealing intellectual property.
Whether China will eventually agree to a new deal with the U.S. remains an open question. The Trump administration recently said it was considering imposing an increased 25 percent tariff on $200 billion in Chinese goods — up from 10 percent previously — to try to force the communist government into negotiations.
Beijing instead said it would respond with retaliatory tariffs from 5 percent to 25 percent on $60 billion in U.S. goods.
“In order to defend China’s rightful interests and the multilateral trade system, China has to retaliate as necessary,” China’s Ministry of Commerce said in a statement on Wednesday.
