Markets tumble as trade war heats up
President Trump escalated a growing trade war with China this week, threatening to levy tariffs on virtually all Chinese products imported to the U.S. unless Beijing makes major trade reforms. Just days after China threatened to impose $50 billion in tariffs on American products, including soybeans, beef, cars, and tobacco—measures that came in response to earlier U.S. tariffs on $50 billion in Chinese goods—Trump upped the ante, ordering U.S. Trade Representative Robert Lighthizer to draw up a list of $200 billion in Chinese products to hit with 10 percent tariffs. Trump then warned that he would order yet another $200 billion in tariffs if China retaliated. Together, that would total tariffs on $450 billion worth of Chinese goods, a sum nearly as large as the $505 billion in goods China sent the U.S. last year.
Wall Street shuddered at the prospect of an all-out trade war. The Dow Jones industrial average tumbled nearly 300 points, about 1 percent, wiping out all of its gains for the year. The European Union, Mexico, and Canada are also preparing to levy retaliatory tariffs in response to the Trump administration’s decision to impose 25 percent tariffs on foreign steel and 10 percent on imported aluminum. The EU will impose penalties on $3.2 billion in American goods at the end of this week, with many of the penalties tailored to target Republican voters, including on sweet corn, bourbon, jeans, and motorcycles. Canada, where citizens have been boycotting U.S. products (see page 15), will likewise impose $12.5 billion in tariffs beginning July 1.
What the columnists said
Bring on the trade war, said Ned Ryun in TheHill.com. China “declared economic war on us years ago” by forcing U.S. companies in China to surrender their intellectual property, dumping steel and aluminum at artificially low prices, and propping up state-owned firms. President Trump should do whatever it takes to bring the regime to heel. He should likewise ignore the “pearl clutching” from Canada and the EU. America has indulged our so-called allies for too long.
America has legitimate grievances with Beijing, said Peter Morici in FoxNews.com, but “China’s privateers are stealing European and Canadian intellectual property and jobs too.” We need help putting pressure on China, and slapping tariffs on our friends only “pushes them into Beijing’s corner.” Trump has said that trade wars are easy to win, said Eric Levitz in NYMag.com, but his “supporters in agricultural areas are already bristling at his protectionism.” Meanwhile, “China’s command economy provides Xi Jinping with plenty of tools for insulating his citizens from price increases.”
So far, Trump has avoided imposing tariffs on most consumer goods, said David Fickling in Bloomberg.com, hoping to avoid political backlash. But it’s impossible for him to hurt China much more without cutting into categories “like clothing, homewares, and electronics.” Prices for washing machines in the U.S. have already risen 17 percent since a separate set of tariffs was imposed in January. “It may well be that the White House’s latest threat is no more than a gambit. America’s consumers had better hope so.”