- Trump’s trade war with China is officially a joke.
- The World Trade Organization just decided that the Trump administration’s trade war with China violates the body’s trade rules – rules that the United States helped design.
- That alone is not enough to sink the trade war into complete absurdity.
- But add the fact that the US trade deficit rose to its highest level in 12 years this summer, and the fact that China is not meeting its purchasing targets and that China has not made any structural changes in its economy and well …
- The whole project looks completely ridiculous.
- This is a pillar of opinion. The thoughts expressed are those of the author.
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We can now officially say that Trump̵
Of course, there is not only one reason, but this week we witnessed the coup. The World Trade Organization – a body that the United States once helped design – ruled that Trump’s original ointment of tariffs on Chinese goods was in violation of WTO rules. Symbolically, this decision crosses the fact that this trade war was a violation of America’s own principles.
In practice, however, this decision will mean little to the administration. Trump and his staff will continue to pretend that negotiations are underway and that progress is being made. But the data do not show it. In July, the US trade deficit – the measure Trump claimed he would narrow by waging this trade war – rose to its highest level since 2008.
Then there is the Phase 1 trade agreement that the United States and China entered into. Beijing promised to buy huge quantities of US goods to close the trade deficit (again, not happen) and increase the US economy. But data from Chad Bown on the Peterson Institute for International Economics shows that China is missing its U.S. targets for purchasing goods by a mile.
There is also little sign that China’s politicians are working on the structural economic changes Trump wants. In fact, since the coronavirus hit China, it has been resorting to old, state-led ways to increase economic production. The same thing happened during the last financial crisis. To avoid the economic downturn, China began pumping credit into state-owned enterprises (SOEs) and infrastructure projects. According to research in The Review of Financial Studies that dealt with, canceled some of the opening of China’s economy that had happened during the decade before.
It is likely that this closure will take place again now during the economic crisis in coronavirus. As Peking University’s finance professor Michael Pettis noted, retail sales – a proxy for domestic consumption – began to catch up with industrial production – which is dominated by SOEs – as a driver of economic growth. Now, industrial production is growing much faster despite the fact that China rejoiced in praising August retail sales.
Finally, there are the costs of the trade war for U.S. businesses and consumers. Last September, Moody’s estimated that the trade war had cost the United States 0.3% of GDP and 300,000 jobs, and other analyzes have shown that Trump’s tariffs resulted in similarly grim job losses.
In May, the Federal Reserve Bank of New York calculated that the trade war had shaved off $ 1.7 trillion of U.S. stock prices. Trump took office, saying his trade tactics would bring US production back, but 2019 was the worst year for the sector since the financial crisis.
So to review: The trade war with China has not achieved the Trump administration’s goal of changing China’s economy, narrowing the trade deficit, and / or bringing production jobs back to the United States. The agreement produced is not complied with. And the United States is being beaten by the WTO – an organization that it again helped design – for violating international trade rules that it helped write.
How is this not a joke?
This is a pillar of opinion. The thoughts expressed are the thoughts of the author (s).