Tariff Is the Wrong Cure to the Wrong Disease That Will Cripple the Global Economy
Enough has been said about how Donald Trump’s trade war with China is a political gimmick, international distraction, and economic disaster. But as the impasse drags on and gives little sign of a resolution, it bears emphasizing that Trump’s tariff on China is the wrong solution to the wrong problem that will only lead the global economy into deeper quagmire.
On August 1, in his typical abrupt style, Trump announced on Twitter that he would put a “small” additional tariff of 10% on $300 billion of Chinese imports, effective September 1. This, together with a series of rounds of levies imposed on Chinese products previously, brings the average US tariff rates on total imports from China to 21.5% from 3.1% before the trade war, according to the Peterson Institute. While giving the appearance that he’s following through on his tough stance against China, these tariffs do little to ameliorate the imbalanced growth in the U.S. and have the effect of worsening the growth prospects for the U.S., China, and the global economy.
Starting from the campaign trail, Trump seemed convinced that other countries, particularly China, were ripping off the U.S., that trade deficit is the root cause of American decline, and tariff will bring jobs back. Plausible as it may sound to the layman, this is the wrong diagnosis of American malaise to begin with.
Economic distress in America is real and not unique. Income and wealth inequalities are soaring, well-paying jobs are lacking despite record low unemployment rate, and social dissatisfaction is high. Beyond a few narrow establishments like Wall Street and Silicon Valley, fruits of economic expansion have not been shared by the greater public. In fact, it can be argued that the current growth model generates progress for the few at the expense of the majority. 
Furthermore, it is an important but often neglected insight that national economic wellbeing depends predominantly on domestic policies. While plenty needs to be done to reform the rules of globalization, including rebalancing away from the current corporatist agenda to labor and environmental priorities, American policymakers need to look from within for fixes to its economic woes. Putting arbitrary pressure on other countries outside the purview of current global arrangements in the hope of solving one’s own problem is no different from trying to “catch fish from a tree”.
America's economic relationship with China has also undergone some fundamental changes over the years. 
While China used to ship a lot of its exports to the US, its reliance on the US markets has declined sunstantially. Even before the trade war started, the US accounted for only less than one fifth of total Chinese export market. And since Trump took on China last March with tariffs on steel and aluminum, China’s export market share in the rest of the world has held steady while its exports to the US dropped. China was quick to conclude more than a dozen free trade agreements with its trading partners this year, and slashed tariff rates on exports from other countries while hiking up retaliatory levies on the US. In fact, as China continued with efforts to rebalance its economy, dependence on other countries for growth as a whole has reduced markedly. For example, its current account surplus hasa lready drop to close to zero from the height of over 10 percent a decade ago, leading the IMF to declare that China has a overall balanced trade relation with the world in its latest assessment.
If it’s America’s trade deficit Trump was after, the outcome could not be further from what he intended. Bilateral trade deficit with China of 30 billion dollars this June is at five-month high amid the trade war and American overall trade deficit with the rest of the world has basically hovered around 50 billion dollars since 2018. Widened deficits with most other trading partners and reduced balance with China simply means inefficient allocation of trade and thus higher costs for US consumers and firms. Trump certainly doesn’t seem to understand or care that net savings equal net exports is an accounting identity for any given economy, not to mention that seeking bilateral trade balance with others in today’s globally networked production is a fool’s errand.
To date, Trump’s tariff has achieved a number of things. At home, it has increased the price of consumer goods, effectively imposing a regressive tax on ordinary families. It has raised the costs of capital goods American businesses import from China, leaving companies with steeper prices which weigh on their competitiveness. Considering the amount and range of goods China supplies to the world market,it is no surprise that tariff costs so far have in fact fallen almost entirely on American consumers and businesses.
The cost of trade war to China isreal and complex. Most directly, China faces pressure on its exports, about afifth of its GDP. Less demand from the U.S. due to higher final prices means lower income and employment growth in China. A pride nation and world’s ascending economic power, China has so far been retaliating against U.S. tariffs with its own tariffs, making American products more expensive for Chinese consumers and firms.
As trade war continues to exert downward pressure on the Chinese economy, two things may be expected. First, China may employ more accommodative monetary and fiscal policies to safeguard growth in order to achieve its 6%-6.5% target this year. This could include stimulating the state-owned sector which policymakers retain more control, which, ironically, is what the Trump administration wished to curtail at the onset. Second, as the biggest contributor to global growth and, truthfully, world economy’s best hope now, slowdown in China is bound to send chilling messages across the world.
The most serious damage of Trump’s tariff may fall on the future prospects of the global economy. As trade war tears apart global value chain and disrupts international order, the world economy may become yet more burdened amid the current precarious recovery, even after the IMF cut global forecast four times in the past nine months. And the dangerous precedent set by the Trump administration in weaponizing economic tools and institutions is already emboldening followers in other corners of the globe. In a world of stagnant growth, rising inequality, and social discontent, it is the last thing we need.
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