On Thursday, President Trump instructed aides to move forward with new tariffs on about $200 billion worth of Chinese goods. With midterm elections around the corner, the president should be looking for a deal and a declared victory, not more tariffs.
The latest instruction for another round of tariffs comes as Treasury Secretary Steven Munchin has tried to restart trade talks with China to avert further trade war pain.
For his part, the president doesn’t seem fazed and doubled down on the trade war on Twitter.
The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?
— Donald J. Trump (@realDonaldTrump) September 13, 2018
From that tweet, it’s clear that Trump profoundly misunderstands how tariffs work and what they do. Tariffs are not a cash generator that magically means the U.S. gains “billions” or brings back jobs and products that will read in big, bold letters “Made in America.”
Instead, tariffs profoundly disrupt trade at the expense of the domestic economy and those around the world. Any money brought in by tariffs is not profit, but rather costs that are directly passed on to American consumers and manufacturers across the board. Essentially, tariffs are taxes. That means more expensive consumer goods, manufacturers that have to pay more for materials, and real losses for the economy.
Of course, if Trump follows through with this threat for a new round of tariffs, China has already promised retaliatory tariffs of its own — further cutting into the U.S. economy and, importantly, realigning trade networks at the expense of the United States.
Pushing China to reform its trade practices is a good and worthy goal, but not only are tariffs not the best way to do that, but Trump doesn’t seem to recognize that this end goal should be the priority of his policy — not an afterthought. If he did, he would broadly support talks with China rather than leaving them in doubt, saying “if we meet, we meet,” while doubling down on tariffs.
Even if Trump doesn’t quite connect these dots (and his tweets show he doesn’t), Americans, and the markets, do. The prospect of renewed talks towards resolution rallied markets, while new threats saw markets drop. Moreover, major companies, like Apple, have warned that the tariffs threatened in the latest round would directly harm the price of their products. Once consumers start to feel the pressure, and they would certainly if Trump moves forward with more tariffs, the trade war is likely to become even less popular.
That would hurt Republicans just ahead of what will likely be hard-fought midterm elections. Republicans are finding it increasingly difficult to support Trump’s policy at the expense of their constituents. Candidates would also likely face increased scrutiny over their avowed support of free trade, which is increasingly at odds with the president’s damaging tariffs.
Republicans need to be able to say that the pain already imposed by the trade war was worth it. For that, they need a deal, not a president wavering on support of renewed talks and threatening new tariffs.
