Tilting at windmills

In U.S. President Donald Trump’s simplistic world-view, slapping tariffs on the U.S.’s main trading partners — Canada, China, the European Union, and Mexico — will reduce U.S. trade deficits, bring back well-paying manufacturing jobs, and make America great again. This has such populist appeal — some 73% of Republican voters support the tariffs according to a PEW Research Center poll in July — that pro-trade Republicans in Congress have largely been silent on the issue. Trade with China Since China, for instance, exported some $505 billion worth of goods to the U.S. last year but imported only $130 billion, Mr. Trump assumes that China could not match the escalation in tariffs since it has a weaker hand. In April, he tweeted, “When you are already $500 Billion DOWN, you can’t lose.” This approach simply ignores the complexity of global supply chains. It also glosses over underlying problems with the U.S. industrial structure. These changes, rather than globalisation, are responsible for the stagnation of average U.S. wages in real terms for almost 40 years. Non-Chinese owned companies account for almost 60% of Chinese exports to the U.S. Much of this consists of very specialised parts required by U.S. factories to make a variety of products ranging from out-board motors for boats to computer routers. Since these non-Chinese companies cannot easily relocate their operations to other countries, the net result is that the burden of the tariffs will be felt by consumers in the U.S. The Trump administration’s imposition of a 20% tax on washing machines in February led to its price going up in U.S. stores by 16.4%.

Source : https://www.thehindu.com/todays-paper/tp-opinion/tilting-at-windmills/article24755974.ece

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