The U.S. and China are locked in an economic arms race to see who can tax who for more essential goods. This game of retaliation is a product of President Donald Trump wanting to reduce the national deficit and improve labor opportunities within the U.S., which is why he tried to prove economic dominance to China. Trump ran on the promise to improve factory jobs for Americans, which is one of the ways he created strong support in the 2016 election.
According to the New York Times, during Trump’s first two years on the job, these manufacturing companies were supposed to move 145,000 jobs back to the U.S., yet data shows a small number of jobs to be relocated as a result of the tariffs which was likely not the effect Trump was hoping for.
“Moreover, the Reshoring Initiative data show fewer than 30,000 jobs that companies say they will relocate to the United States because of Mr. Trump’s tariffs on imported steel, aluminum, solar panels, washing machines and a variety of Chinese goods,” reported New York Times writer Jim Tankersly.
China and the U.S. are two top economies in the world and the dueling tariffs are pretty much due to Trump’s need for economic supremacy globally.
In several tweets last week, Trump called out China for essentially duping us with the tariffs they have in place. Some would argue the damage to the U.S. economy as a result was reason enough to put the tariff war to a halt, but Trump believes otherwise.
“Absolutely worth it, we don’t want to be servants to the Chinese! This is about American Freedom. Redirect the supply chain. There is no reason to buy everything from China!” he tweeted.
We shouldn’t be surprised this has happened. According to Marketwatch.com, during Trump’s 2016 election campaign, he stated he would not continue to let Beijing “rape our country,” at a rally in Fort Wayne, Indiana.
Gao Feng, minister of commerce for China, issued a statement to Trump saying the continuance of this trade war would not be ideal.
“Under the current situation, we think the problem that should be discussed is the cancellation of tariffs on $550 billion worth of Chinese exports, to prevent further escalation of the trade war," said Feng.
You don’t have to be an economics buff to follow the economy, because even I, a terrible mathematician and also not an economist, can clearly see that a larger storm is brewing between China and the U.S., and we are on a downward slope greased with butter. Here’s why:
The weaker Chinese currency (Yuan) is, the less products can be sold for globally. If the Yuan is weak, it creates an incentive for other counties to buy from China, thus fueling their economy further and taking away foreign business from America, thus adding to our national deficit.
Out of fear of the weakening Yuan and its lingering promise of cheap goods, investors pulled out of American stocks, sending the stock market into a downward spiral. A global recession is looming over our heads if the two world economic powers do not take action.
According to MarketWatch.com, Morgan Stanley, a global finance company, fears a global recession is possible if our global market growth decreases. Morgan Stanley defines a worldwide recession is when growth is below 2.5%.
“If those 10% tariffs are kept for longer than four or five months, global growth will remain weak in the range of 2.8% to 3%, despite interest-rate cuts from central banks,” writes MarketWatch.com editor Steve Goldstein.
Though President Trump claims to have a good relationship with Chinese President Xi Jinping, these trade wars will most likely worsen unless there are talks between the two national leaders.