Ralph R. Reiland: Trade war's opening barrage
One day after he proposed new tariffs on imports of steel and aluminum of 25 percent and 10 percent, respectively — duties designed to protect U.S. producers, strengthen national security and safeguard U.S. manufacturing jobs — President Trump portrayed his tariff plan as basically simple in terms of vision, strategy and consequences, saying “trade wars are good, and easy to win.”
Left unsaid was the likely problem of U.S. job losses due to retaliatory tariffs against U.S. exports — more U.S. jobs being destroyed than saved due to price hikes on American goods directly caused by cost-hiking tariffs.
“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump tweeted. “Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore — we win big. It's easy.”
Wall Street and the nation's investors don't appear to agree that it's that simple and easy, or so certainly a winning strategy, to impose billions of dollars in new duties on imports, as demonstrated by recent, abrupt stock selloffs that produced the nation's worst week for equities in more than two years.
Concerns about a trade war rocked Wall Street, causing the Dow to shed more than 1,100 points in two days.
Trump further rattled investors by announcing plans to impose tariffs on an estimated $50 billion of Chinese imports, in retaliation for alleged Chinese theft of U.S. intellectual property.
Declaring it “will not recoil from a trade war,” China announced a retaliatory plan against Trump's proposed aluminum and steel import tariffs by putting forward tit-for-tat tariffs of its own that target U.S. exports to China.
On its website, China's commerce ministry posted a list of 128 U.S. export products targeted for new Chinese tariffs ranging from 15 percent to 25 percent, including wine, pork, soybeans, fruit, nuts, ginseng, ethanol, steel pipes and recycled aluminum goods.
“We are looking at all options,” stated Cui Tiankai, China's ambassador to the United States, perhaps signaling that China, America's largest creditor with more than $1 trillion of Treasury bonds, could ease its purchases of U.S. bonds in response to U.S. tariffs.
Similarly, the European Union, faced with tariffs on its steel and aluminum exports to the U.S., issued a 10-page listing of U.S. exports it's targeting for tariffs, including automobiles, paper products, wine, shoes, whiskey, blue jeans and an array of agricultural products, including tobacco and rice.
European Commission President Jean-Claude Juncker pointedly added, “We will put tariffs on Harley-Davidson, on bourbon.”
Bourbon is a key product of Kentucky, home state of Senate Majority Leader Mitch McConnell.
Iconic Harley-Davidson, one of the world's largest motorcycle manufacturers, is headquartered in Wisconsin, home state of House Speaker Paul Ryan.
The shelling has begun.
Ralph R. Reiland is associate professor of economics emeritus at Robert Morris University and a local restaurateur (email@example.com).