As the trade war between the United States and China continues to escalate, so does the burden on U.S. consumers. Last week, President Donald Trump announced the U.S. would impose a 10 percent tariff on an additional $300 billion worth of Chinese imports starting next month. Just a few months earlier, Trump had agreed not to impose more tariffs after meeting with Chinese leader Xi Jinping. But the administration reversed course as punishment for China’s failure to live up to its commitments, including buying more American agricultural products. On Monday the Trump administration also labeled China a currency manipulator—for the first time in a quarter century—after Beijing allowed its currency, the yuan, to weaken.
Last year Trump assured Americans that “trade wars are good and easy to win.” But more than a year in, tariffs placed on a number of countries—including close allies like Canada and Mexico—are continuing to hurt Americans. According to Tariffs Hurt the Heartland, a coalition of trade associations and agriculture commodity groups, $3.4 billion of the $6 billion collected in tariffs by the U.S. in June are from tariffs imposed under Trump—a 73 percent increase from June 2018. According to CBS News, consumers are more likely to feel the effects as the new list of targeted Chinese products—approximately 3,800 items—includes smartphones, clothing, footwear, food, electronics and books. In retaliation to Trump’s new tariffs, China struck back by haltingpurchases of U.S. agricultural products—hurting farmers who are the most affected by the trade war.
Looking longterm, it appears that rather than relocating offshore manufacturing back to the States, as some U.S. officials hoped would happen, they are choosing to shift manufacturing elsewhere. According to a survey conducted by the American Chamber of Commerce in China, 40 percent of U.S. companies with manufacturing units in China are planning to, or have already shifted their operations to other manufacturing hubs including Vietnam, Malaysia and/or India. At the same time, data shows the manufacturing sector is expanding at the slowest pace since 2009. As it currently stands, there seems to be no end in sight. According to Naka Matsuzawa, Nomura’s chief rates strategist in Tokyo, “many investors have expressed the view that China is prepared to accept an economic downturn (and thus a global economic downturn) to prevent President Trump’s reelection.”
