It’s official: Trump trade war with China is unplanned disaster


  • Trump’s trade war with China is officially a joke.
  • The World Trade Organization just ruled that the Trump administration’s trade war with China violated the body’s trade rules – the rules helped design the US.
  • This alone is not enough to submerge the trade war in a rude manner.
  • But add the fact that the US trade deficit widened to its highest level in 12 years this year, and the fact that China is not meeting its purchasing goals, and China did not make any structural changes to its economy and well is. .
  • The whole project looks completely ridiculous.
  • This is an opinion column. The views expressed are those of the author.
  • For more stories visit the Business Insider homepage.

Now we can officially say that, Trump’s trade war with China is an uncontrolled, far-reaching disaster.

There is not just one reason, of course, but this week we saw the coup grace. The World Trade Organization – a body the US had once helped design – stating that Trump’s initial salute of tariffs on Chinese goods is in violation of WTO rules. Symbolically this ruling is the fact that this trade war was a violation of America’s own principles.

In practice, however, this decision would do little for the administration. Trump and his staff continue to show off as the negotiations continue, and this progress is being made. But the data does not bear out. In July, the US trade deficit – which Trump claimed was going to be narrowed by increasing this trade war since 2008 – reached its highest level.

This was followed by the Phase One trade agreement in the US and China. Beijing made a trade deficit (again, not happening) to buy American goods in large quantities and promised to boost the US economy. But Chad Bown’s data at the Peterson Institute for International Economics show that China is a mile away in purchasing its American goods.

Phase 1 US China Trade Agreement Tracker


Peterson Institute for International Economics


There is also little indication that Chinese policy-makers are working on Trump’s structural economic changes. In fact, China has turned to older, state-led ways of boosting economic output ever since the coronovirus hit. The same thing happened during the last financial crisis. To avoid economic decline, China started lending to state-owned enterprises (SOEs) and infrastructure projects. According to research in The Review of Financial Studies, some of the process of opening up of China’s economy took place in the last decade.

It is likely that this cessation is now occurring again during the coronovirus economic crisis. As finance professor of Peking University Michael Pettis noted, Retailing before 2020 – a proxy for domestic consumption – was beginning to catch up with industrial production – which is dominated by SOEs – as drivers of economic growth. Industrial production is now growing very rapidly despite the fact that China has pleased Rogers in August retail sales numbers.

The end is the cost of a trade war for American businesses and consumers. Last September Moody’s estimated the trade war cost 0.3% of GDP and 300,000 jobs and other analyzes have found that Trump’s tariffs have resulted in equally severe losses.

In May, the Federal Reserve Bank of New York calculated that the trade war had invested $ 1.7 trillion in US stock prices. Trump entered office stating that his business strategy would bring back US manufacturing, but 2019 was the worst year for the sector since the financial crisis.

Hence to review: The trade war with China has failed to achieve the Trump administration’s objectives of transforming China’s economy, reducing trade deficits and / or bringing manufacturing jobs back to the US. The agreement that has been reached is not being followed. And the US is being dinged by the WTO – an organization that, again, helped design – for violating international trade rules that it helped write.

How is it not funny?

This is an opinion column. The views expressed are those of the author.