Jonathan Kraut | On Trump’s Tariff War with China

Our president continues to wage a dangerous tariff war with China. Trump upped the stakes just the other day by ordering a 25% tax on many exports such as steel.

China, of course, aware that Trump’s bluster is rarely backed up with any effort long-term, reciprocated with tariffs on American goods, with a 25% tax on some exports from the U.S. to China. 

The Chinese know Trump’s threats last about six weeks and then he caves, pretending victory.

But even six weeks of higher prices on about everything at Costco and many goods at Walmart and Target will hit our wallets hard. 

By the way, did you know that the Costco name comes from “Chinese Offshore Shipping Transportation Company?” Did you know that Costco’s “Kirkland” brand is named after the seaport destination for Chinese ships of Kirkland, Washington?

I hate to agree with the president’s efforts on most matters, but this attention on China appears to be a valid one.

China condones the stealing of U.S. intellectual property and illegal use of patented technology. 

China artificially manipulates its currency to provide the best international trading position possible for its economy.

China uses low wages to produce less expensive goods and flood world markets, cutting our jobs and economic position.

Trump’s intent to create a fairer arrangement with China, I feel, is a valid objective.

Funny that the notion of tariffs and artificial economic barriers have long been opposed by the Republican party. Free markets and less government interference in commerce have been the hallmarks of Republican thinking.

Trump, on the other hand, enjoys using leverage, policy manipulation, and threats of government interference as means to gain a compromise. Without the use of a tariff war, China would of course make no changes or accommodations to what clearly is an unfair and imbalanced foreign relationship with the U.S. 

But how we can expect Trump’s brief but damaging approach to applying pressure to China will affect us?

Many prices of items you and I buy will skyrocket. 

American jobs and wages will be lost. 

An estimate is that in just San Pedro and Long Beach, up to 100,00 shipping, transportation and warehouse jobs will be temporarily cut. Billions in manufacturing orders will be halted and layoffs nationally will be commonplace. 

Our government will end up throwing away billions to artificially support the higher cost of exporting so American manufactures can stay alive. Not only will this weaken the dollar, but also the currency exchange rate with China will erode our buying power and move more economic control to the Chinese.

Despite valid intentions, the rub is that Trump’s trade war policies will have no positive effect.

American consumers are going to pay more and this money goes to China. The U.S. treasury is going to help manufacturers pay new tariff fees, which also go to China.  

It seems like Trump’s tariff war essentially will be paid by American and the U.S. Treasury to China and there is no down side for the Chinese.

While only 15% of U.S. imports actually come from China, our economies are linked at the hip — and finding new sources instead of Chinese goods will take years. 

The end game is this: 

1) China will pretend to apply pressure on its economic sector to follow international patent and trademark protections. Trump will claim this feigned victory as significant, but we know China benefits from stealing intellectual property and no Chinese practices will change. 

2) China will not stop manipulating its currency. Monetary manipulations, such as tariffs and taxes, are exactly what Trump is doing now with this trade war. Every country does this. There is a no-win possibility here but China will state something accommodating that Trump will misinterpret as a win.

3) We will all pay more for Chinese goods, bolstering China’s economy and weakening our own with layoffs, company shutdowns and economic stress.

4) This temporary get-tough-with-China policy is a political move with no actual positive consequence or significant outcome to be expected. At least for the president, Trump can use this ploy to claim a victory.

As most of us are well aware by now, everything Trump does is about himself. This tariff war is simply designed so that he can be perceived as a strong and smart leader. 

Even at the cost of our wallets, layoffs, economic weakening, and gains only for the Chinese economy, Trump again happily gambles with our well-being to enhance his status and political fortunes.

Jonathan Kraut directs a private investigations firm, is the CFO private security firm, is the COO of an Acting Conservatory, a published author, and Democratic Party activist. His column reflects his own views and not necessarily those of The Signal or of other organizations.         

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