adonna

Fight or flight is the natural biological response to a dangerous situation. In the case of China’s dangerous rising political and economic power, President Trump has chosen to fight.

For more than 50 years America has been the world’s leader in political stability and policy, as well as an economic force never seen before. However, Chinas is now contending for the position as global economic top-dog. In response, President Trump, furthering his America first campaign, has implemented tariffs as a use of economic nationalism, resulting in a trade war between the two largest and most interdependent economies in the world.

Tariffs are simply a tax placed on imported goods from a particular country. For example, if a German car is $10,000 and the U.S. government has a 10 percent tariff on auto imports, the importing American firm will pay $1,000 to the U.S. customs authority upon the car’s arrival at the U.S. port. Almost every country does this as it helps collect tax revenue, protects infant industries and protects domestic producers.

While the total monetary gain from tariffs is modest, they do impact the last two items. Infant industries are companies that are just starting out and face steep competition from more established or mature foreign firms. Finally, in hopes of allowing domestic industries to grow, a government might places tariffs on competitive foreign goods to encourage customers to buy from the domestic firms. The last is a more widely accepted economic use of tariffs, although pure free-marketers advocate for capitalism to weed out these weaker firms. Nonetheless, tariffs are primarily used as a political weapon to achieve economic advantages. As we are seeing now, Trump is using tariffs in an attempt to protect American industries and as a way to honor 2016 campaign promises. However, he severely miscalculated his plan.

This miscalculation can be seen in President Trump’s economic crusade against China. His 2016 political base consisted of white working-class conservatives whose jobs were mainly in the farming and manufacturing sectors of the U.S. economy. Yet, the American economy is shifting. Tech employment in the United States expanded by nearly 200,000 jobs in 2017, to an estimated 11.5 million workers; and at $1.6 trillion, the tech sector is one of the largest components of the nation’s economy. But, to further his agenda, Trump developed a populist movement, tapping into these people’s fears about job loss and offshoring. Trump promised to bring jobs back to America; hence the tariffs on manufacturing (steel, aluminum) and agricultural products (soy beans), all of which have been heavily offshored. Here is the irony Mr. Trump overlooked: America is the biggest buyer (importer) of these products, so implementing tariffs only increased the cost to American firms. In response, China retaliated with tariffs of their own on U.S. products. This lowered demand from America’s biggest customer. And whenever such de-stabilizing economic events occur, investors panic.

Both American and Chinese stocks fell dramatically when rumors of a trade war surfaced. Americans who voted for Trump’s economic protectionism ended up getting something a lot worse, an oversupply of product due to rising political tension and little profits to show for it. As Chris Pratt, the plant manager at Mid-Continent Nail, the largest nail manufacturer in the U.S. put it recently in The New Yorker: “Never did I think when Trump campaigned on ‘Make America Great Again’ we’d have to lay off all these people.”

The scary part is Trump fails to recognize the destruction he is causing. At a press conference Sept. 26, 2018, President Trump said: “And it’s [trade war] had no impact on our — absolutely, by the way — no impact on our economy which I said it wouldn’t.” But it has. As reported by Reuters, “The U.S. Department of Agriculture stated that total U.S. agricultural export shipments to China for the first 10 months of 2018 fell by 42 percent from a year earlier to about $8.3 billion and the most actively traded soybean futures contract averaged $8.75 per bushel from July to December 2018, down from an average of $9.76 during the same period a year earlier.”

Hopefully for America’s economic well-being we will see this trade war rhetoric calm down. The global economy is booming and does not need to be thrown off track by the president’s relentless pursuit of economic superiority. Economic nationalism sounds good, but ultimately harms its very supporters.

Vincent Addona is a senior political science major at Lander University. He has a keen interest in the financial markets and plans to start his career in the financial services industry upon graduation. Addona’s column is part of Lander University’s “Achieving the Promise” project which is generously funded by SC Humanities whose mission is to enrich the cultural and intellectual lives of all South Carolinians.