Trade Wars Escalate ...
"Your all time favorite President got tired of waiting for China to help out and start buying from our FARMERS!" tweeted Tariff Man Trump yesterday.
"Tariffs will make our country much stronger. Just sit back and watch!"
The President hiked tariffs to 25% on an additional £200 billion dollars of imports from China this week. The impact will take four weeks to implement with every opportunity to secure a deal in the meantime. It doesn't seem likely given the drift between the two negotiating teams and the hard line approach from Beijing and Washington.
Two days of talks ended on Friday with no sign of agreement. The President continues to claim China will pay for the tariffs, much like Mexico will pay for the wall. This is a fabrication of course. The US Chamber of Commerce has made their views well known. Trade works, tariffs don't. American businesses and consumers are bearing the brunt of the global trade war, they say. "It is plain to see the tariffs are inflicting harm on the American economy. They will continue to do so unless the administration changes course. The US needs free and fair trade. Imposing tariffs to get there is the wrong approach."
US farmers are also unconvinced. In the Mid West, farm incomes have fallen, farm bankruptcies have increased. News from Washington of the next round of tariffs was another great setback to businesses, Businesses which had spent years developing markets in China are now seeing lucrative markets for soybeans and other crops disappear.
Despite the claims of the President, it is clear the American consumer is paying the price. The 20% tax on white goods has led to a 12% increase in retail prices for washing machines according to a study by economists at the Federal Reserve and the University of Chicago.
A tariff is a consumption tax. Americans will be paying higher prices on greater range of goods as a result of the President's policy. Farmers may be bankrupt before trade deals are secured.
Trump famously declared in March last year, "Trade Wars are good and easy to win". The President has yet to show he can strike a deal with China. Next up is Europe. Phillip Hammond warned this week, a further escalation of the trade wars would have serious consequences for Britain. If the President turns his attention to the trade deficit with Europe, the consequences will be all the greater.
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