Life is about to get more expensive during the trade war with China
Life is about to get more expensive. The trade war with China means that prices will spike on hundreds of products ranging from televisions to cars.
President Donald Trump says not to worry. He said Monday “in about three or four weeks” the country will know whether trade talks with China are going to be successful. “You never really know, right?” the president said at a White House dinner. “But I have a feeling it’s going to be very successful.”
The trade war is one that is fought with a tariff. It’s a tax that the United States charges businesses that import goods from China. And China, in retaliation, then charges its tariff on goods sold by American companies to that country. The problem that the Trump administration would like to resolve is that China sells far more product to the United States.
A tariff makes the price of the import more expensive, in one theory, gives domestic producers an advantage. Only that is not what is happening because as many farm products lose their international sales there is not enough demand to make up the difference.
“Soybean futures fell to the lowest level in a decade as an escalating trade war between the U.S. and China dimmed hopes that the Asian nation will resume purchases of American beans and ease a supply glut,” reported Bloomberg on Monday. “Farm commodities from pork to cotton slumped on Monday, with soybeans dipping below $8 a bushel for the first time since 2008, after China said it will raise tariffs on some U.S. goods starting June 1.”
One immediate concern is that China will begin cancelling orders already purchased but not yet shipped.
Agriculture is a $3.3 billion industry in Indian Country, according to data compiled by the Agriculture Department. That is made up of both crop sales and livestock both of which will see reduced international sales during a trade war.
Another area that impact tribes and tribal enterprises is the cost of construction. The cost of raw materials, especially steel, go up. Steel is the most common material used in construction of hotels, casinos, and other commercial buildings, accounting for about 16 percent of a building’s cost.
Of course the administration is hoping that China will back down and reach a trade deal with the United States before late June when these new taxes begin. That tariff will hit virtually every product from China.
Trade policy is one of those issues that defy party politics. It's a problem that has been building for decades because the United States imports more goods than it buys.
A recent essay from the conservative Heritage Foundation says global trade has been a good thing and especially because it's reduced poverty. "This strong correlation between trade freedom and reductions in poverty seems to refute the narrative we often hear. Rather than hurting the poor, the removal of international trade barriers allows millions of people to escape poverty," wrote Bryan Riley, a policy analyst.
"For a practical example of how trade barriers hurt the American poor, consider U.S. import restraints on food and clothing, Riley wrote."
And many Democrats think the president is right to take on China in a big way.
The White House posted support from prominent Democrats including, Senate Minority Leader Chuck Schumer, D-New York, saying: “Hang tough on China, President @realDonaldTrump. Don’t back down. Strength is the only way to win with China.” And Sen. Sherrod Brown, D-Ohio, who said “China’s cheating has hurt American workers for far too long. Tariffs brought China to the negotiating table and now that we’re there, the President must secure real changes to level the playing field.”
And some see slowing trade as a good thing for the climate. A report by the United Nations said: “The interplay between a climate change agreement and expanding international trade poses an important policy conundrum: behind every trade transaction there is a production process and, in turn, associated greenhouse gas emissions. Policies that modify trade (trade policies) can influence emissions, while policies for reducing emissions (climate change policies) can also influence trade. As the major direct sources of greenhouse gas emissions are related to production processes, climate protection measures addressing such sources can have a major impact on developing countries focused on increasing productive capacities to strengthen their integration into the global economy and trading system.”
The UN said a better route is cooperation, on trade and climate. “The most direct way to reduce greenhouse gas emissions in an economy involves establishing a mix of policies, regulations and institutions that progressively green a nation’s productive activities,” the United Nations said.
Mark Trahant is editor of Indian Country Today. He is a member of the Shoshone-Bannock Tribes. Follow him on Twitter - @TrahantReports