There may be more Chinese import tariffs to come according to President Trump. He has stated that he is prepared to apply tariffs on every form of imports into the USA from China should it become necessary. Will this help or hinder Donald Trump in his drive to protect US intellectual property?
Negative Balance of Trade Promoted Trump’s Actions
China exported just over $500 billion of goods to the US in 2017, while the US exported $129.9 of goods to China in the same year. In view of this negative balance of the trade, it is easy to understand Trump’s attitude. However, could there be other ways of handling this disparity other than tariffs? Applying tariffs increases the price of many goods purchased by Americans, and could increase the cost of living unless US manufacturers can compete.
US Intellectual Property the Main Issue
While China has applied tit-for-tat tariffs to date, it will be unable to do so for much longer. President Trump’s reason for these tariffs is that China is reconstructing US technology – or stealing American intellectual property. It is easy to understand how he feels about this, although whether his approach is good for Americans is debatable. Prices will rise with these Chinese import tariffs. The US is currently unable to replace Chinese goods with the type and volume of products involved. So prices must go up!
According to Donald Trump, the US “is being taken advantage of” and the tariffs are necessary to remedy this. However, for most Americans, the question will be one of economics, not fairness of the trade. Prices of Chinese-produced goods will increase unless US manufacturers can produce the same products – or import from alternative sources.
Chinese Import Tariffs and George W Bush Experience
Let’s not forget the experience of George W Bush in 2002! He placed a tariff of 30% on steel imports and this backfired on him as thousands of US workers lost their jobs due to the increased price of steel. Not every steel-using firm could absorb the 30% price increase.
Donald Trump could find himself in a similar situation. It looks good on paper to apply taxes (which is fundamentally what tariffs are) to foreign goods. However, if these are raw materials needed for the manufacture of essential items, it could easily backfire. Ultimately, it is the price of goods in the stores that most people are concerned about. If their president takes action that increases these prices, then that president is unlikely to retain popularity.
Will Chinese Import Tariffs Work?
Time will tell! History is based not only on who won what war, but also on the economical factors. George W. Bush applied 30% tariffs on steel that rebounded on him. Thousands of workers lost their jobs with firms unable to absorb that level of raw material increase. They simply folded or downsized. Will Chinese import tariffs work or will they rebound on Donald Trump?
