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Politics

Chinese Tariffs… Good or bad?

The United States and China are the two most influential, economic powerhouses in the world.  These two countries are different socially and culturally, but both aim to be “number one.”  There are many ways to potentially accomplish this, but many argue that imposing tariffs is the most effective method.

The United States and China are currently fighting a war not fought with weapons, but with the swiping of pens.  This war is known as a trade war, and it is difficult to determine which country currently has the upper hand.  Both the U.S. and China are taking aim at each other, retaliating when action is taken against them.  This economic dispute started, seemingly, when the U.S. accused China of theft of intellectual property (patents, copyrights, etc.), leading the U.S to slap a 25 percent tariff on $50 billion worth of Chinese goods.  According to CNN Politics, China matched the tariff “dollar for dollar” on U.S. goods.  CNN has recently reported that the U.S. plans to retaliate this tariff by unveiling a $200 billion tariff on Chinese goods.

The White House has released comments about the tariffs, stating that they are “necessary” to punishing Beijing for unfair trade and the theft of intellectual property. China also released a statement accusing the United States of “bullying” them with trade.  This is only the beginning of what could be an extensive, economic dispute between the two nations.  Economists estimate that this “trade war” is going to last for at least a decade.  This is also not the first time the United States and China have butted heads, economically.

A trade war has consequences for both suppliers and consumers, alike.  A trade war that is projected to last for decades will leave an everlasting impact on the world.  The consequences and results of a trade war are often unpredictable to everyone, including economists.  Determining whether China will surrender to this trade war, or retaliate with higher tariffs is difficult.

So far, these tariffs have impacted many goods manufactured in China.  One such example is the recently-released iPhone Xs. Pinpointing the reasons why this phone costs over $1,000 is no easy task.  This inflated price, in part, could be a result of the American-imposed tariffs.  iPhones, like many popular household goods, are manufactured in China. Walking into a Best Buy or Sears, one would likely notice higher prices for many electronics and appliances as a result of this trade war.  The suppliers and retailers could increase prices entirely to cover for the tax hike, but that would drive too many consumers away.

Aside from the economic consequences, these tariffs also have political consequences, particularly for Republican senators and President Trump.  Throughout his term, President Trump boasted a booming economy.  Such examples include the DOW Jones Industrial Average closing at over 25,000 points, 3.9 percent unemployment, and 4.1 percent GDP growth in the second quarter of 2018.  President Trump is correct in noting that the economy is growing, however, the tariffs could potentially hinder economic growth in both the United States and China. It all depends on how China reacts to the United States imposing tariffs on their economy.  If the Chinese government were to retaliate again, potential economic downfall would depend heavily on how American consumers react to increasing prices.

Although President Trump supports these tariffs on Chinese goods, Senators across party lines have mixed emotions on the topic.  Senator Chuck Schumer (D-NY), one of President Trump’s biggest critics, came out in support of the tariffs, calling China our “real trade enemy,” according to CNBC News. Some members of President Trump’s own political party are against the tariffs on Chinese goods.  According to CNBC News, Senator Orrin Hatch (R-UT) praised President Trump for “taking on China,” but claimed that tariffs would “hurt American and Chinese consumers and businesses alike” and “could halt economic growth in both countries.”  Another critic of the tariffs, Senator Jim Inhofe (R-OK.), claimed that farmers “do not want the federal government in the export market,” according to USA Today.

Currently, the United States has a trade deficit with China. In 2017, the United States had a previous $376 billion trade deficit with China.  Economic data for 2018 has not yet been calculated, leaving the world in suspense over what could occur next in this developing trade conflict.