Trump Now Threatens Tariffs on All Goods from China: $450 Billion

The markets are reeling a bit today and bond yields are falling on news of escalating trade war threats.

China pledged to strike back on Trump's announcement of $200 billion worth of tariffs on Chinese goods. But before China could even respond, Trump threatened to put a tariff on all goods from China in belief the US Can Win a Trade War With China.

Peter Navarro, a White House trade adviser, said on Tuesday morning that the United States had given China numerous opportunities to negotiate and change policies that have cost Americans millions of jobs, and the Trump administration was now prepared to impose tariffs on $450 billion of Chinese goods in order to force Beijing to bend.

“President Trump has given China every chance to change its aggressive behavior,” Mr. Navarro said in a call with reporters. “China does have much more to lose than we do,” he added, saying that a trade clash would affect China much more than the United States, given China exported nearly four times the value of goods to the United States last year than the United States sent back.

"Winning" Defined

Trump has a peculiar definition of winning. If the US loses less than China, that's called "winning".

US Goods Exports to China

Fred does not have a similar chart for US imports to China.

How can China impose like tariffs? Answer: It can't, directly, on goods as shown by the following Census Department Foreign Trade Charts.

US Goods Trade With China in 2018

US Goods Trade With China in 2017

In 2017, China imported about $130 billion in goods from the US. The US imported $505 billion in goods. The US has a small trade surplus on services.

The charts show China will have a difficult time retaliating if Trump does indeed place tariffs on all goods from China.

Lose-Lose

It is on this lose-lose basis that Trump expects to "win".

Note that "winning" will increase costs of all US manufactured goods that use any parts from China. In regards to steel alone, the US has about 140,000 steel production jobs. The US has about 6.5 million jobs that depend on steel.

Winning by Losing

  1. A Fed study shows "Tariffs Kill High-Paying American Manufacturing Jobs and Businesses".
  2. Auto job losses alone are likely to hit 45,000 as noted in Pandora's Box: Another Look at Steel Tariffs.
  3. On June 8, I noted Three US Tire-Chord Makers Threaten to Close Doors Due to Trump Tariffs.

Trump believes China will lose more. This we call "winning".

Mike "Mish" Shedlock

Comments (22)
No. 1-22
Irondoor
Irondoor

If China imposes tariffs on imported US goods in dollar amount equal to 3.9 x the tariffs the US imposes on Chinese goods, then the tariff dollars (but not the trade dollars) will balance. Other than continuing to screw companies doing business in China and stealing our intellectual property that's about all they can do directly. I'm sure they will think of something else to find our "uncle" point. Like convincing the N Koreans not to do a deal with Trump or invading Taiwan to showing the world that they are equal to the US in the western Pacific. But, they don't know or understand Trump. He's convinced that this is showdown time with the Chicoms. He thrives on chaos while the Chicoms want control and to do business in their own intimidating fashion.

FelixMish
FelixMish

I sure hope this "policies that have cost Americans millions of jobs" is another "weapons of mass destruction". That is, something thrown up against the wall and sticking, used to rally the public behind a particular initiative. An initiative, for instance, like getting China to more open up their internal market. Consider, for instance, how quite a number of outside companies were and are shut out of China. Google comes to mind.

So far as "costing American jobs". Thank God. While those jobs were lost they also changed from being "good manufacturing jobs" to being "sweat shop labor". Same job. Time marched on.

Many Mish readers can probably remember those factory jobs. Loud, dangerous, low pay (though relative to the times, the pay could be good). Those jobs sucked. And they paid less than what you can get from the gov'ment now for being a warm body.

Those jobs went to really, really poor subsistence farmers for a century. The world is running out of subsistence farmers, so those jobs will be done by machines before the shouting's over. Those jobs are already leaving China, though China still has several hundred million subsistence farmers.

Where does a US President get the power to significantly crank up (or down) particular taxes like tariffs? I'd think that would be a congressional thing.

All in all, watching this is like watching the thinking behind a weird group comprised of "wage and price" controllers and those who think its a great idea to "help" subsistence farmers with clever stoves and water filters. Count me out of both groups. I'll vote to keep taxes spread as widely as possible rather than trying to use them to manage an economy like a good soviet should. And, I'll vote for "helping" by allowing and encouraging people to change from subsistence farming to neurosurgery.

channelstuffing
channelstuffing

How prey tell do you have a trade war when you poduce nothing?Unless china puts tariffs on treasuries (lol),that's our number one (only) export...dept (and WAR)

Sechel
Sechel

Canada may export more to the U.S. than vice versa but there are many U.S. companies trying to expaand in China in a bid to earn a profit such as Apple , Walmart and GM. As a non -democratic country China has a great many tools available to punish American companies. Bottom line, Trump is playing brinkmanship but China can sure bloody the U.S. There won't be any winners.

TexasTim65
TexasTim65

The Cardinal Rule of Relationships (between countries, businesses or friends/lovers) is: "In any relationship, the person with the most power is the one who needs the other the least."

China needs the US way more than the US needs China (they must export since they have no domestic consumption and they've brought hundreds of millions of people from farms to cities so they NEED something to keep them busy work wise or else the social unrest will be off the charts as Michael Pettis has noted so many times). So ultimately Trump has the power in this relationship and he will get whatever he wants. Yes, there is going to be pain for the US, China and who knows how many more countries but in the end he's going to get whatever deal he things is best (whether that's better than what exists remains to be seen since no one knows what the final outcome is going to be).

Incidentally this is why he's able to make demands on Europe, Nato etc because they need the US more than the US needs them.