Not a week goes by without a news segment broadcasted or article posted that doesn’t touch on this ubiquitous trade war. It is no surprise that it has garnered such attention as China is currently at the forefront of it. There’s a lot of back and forth between the nations, a giant dose of speculation from journalists and commentators, and a lot of confusion for the rest of us. So what exactly does this mean to the average American?
Tariffs, Tariffs, Tariffs
The U.S administration have been using tariffs as a tool to keep American jobs in America and to reignite U.S manufacturing. That would in turn create even more jobs.
On top of that, Chinese intellectual theft has really lit the fire under their seats, which is why they have been a main target. CNN Tech reported that after a seven-month investigation by The United States Trade Representative, found that “Chinese theft of American IP currently costs between $225 billion and $600 billion annually.” This loss affects the economy tremendously and by enacting these tariffs, the hope was to keep the money in American hands.
What’s on the Line
The proposed tariffs against China is would be aimed against an estimated $50 billion dollars worth of Chinese goods imported into the U.S. That’s some cold hard cash. But, it turns out that could leave many Americans out in the cold. That is because China fired back with proposed tariffs on about 106 American imports, according to Sourcing Journal. This list includes: cotton, soybeans, cars and more. At first glance, 106 items may not sound like cause for concern, it could lead to a devastating loss of 134,000 U.S jobs.
Many economists do not predict a full blown trade war, but there has been research on what would happen if that were the case. It was reported that the non-partisan Penn Wharton Budget Model at University of Pennsylvania, did a study of how the economy would be affected if it did take place. This was under the circumstances that all free-trade agreements were abolished and there were no goods being imported or exporting without tariffs. The study broke down the results saying,
“Such a trade war would make US economic output 0.9% lower than otherwise by 2027, according to the analysis. Over the same period, the tax cuts, in the best scenario, would boost output by 1.1%.Over the longer term, the costs of a trade war would heavily outweigh the benefits of the tax cut. By 2040, the US would lose 5.3% of economic output in the worst trade-war scenario, compared with a 1.6% increase from the tax cuts, the university found. Put another way, a full-blown trade war would cost the economy $200 billion over 10 years, and $1.4 trillion by 2040.”
“No such thing as a free lunch”
With the possibility of diminishing benefits of the tax breaks for the American household, many are uncertain about whether the tariffs will really protect American jobs and workers. In addition, with new tariffs being slapped onto imports, prices are going to go up on everyday goods. The money has to come from somewhere and unfortunately that will be the consumer. This will come in the form of clothing, cars, toys and much much more as companies pass on the cost.
The news on the trade war changes weekly, sometimes daily so what is stated now, may not stand three months from now. This has lead many employers, employees and average Americans into a new state of uncertainty. That is why will be keeping you updated on the ever-changing trade landscape and how it affects the American people.