WASHINGTON (AP) — With President Donald Trump intensifying his rift with U.S. trading partners, economists are growing more doubtful that any deal that might benefit American workers and companies is in sight.
Instead, many analysts say they expect the Trump administration to impose more tariffs on China and potentially other key U.S. trading partners. With those nations almost certain to retaliate, the result could be higher prices for Americans, diminished export sales and a weaker U.S. economy by next year.
In an interview with CNBC that aired Friday morning, Trump renewed his threat to ultimately slap tariffs on a total of $500 billion of imports from China — roughly equal to all the goods Beijing ships annually to the United States. The president has already imposed tariffs on $34 billion in Chinese goods, and Beijing has retaliated with tariffs on an equal amount of American exports. The White House has also itemized $200 billion of additional Chinese imports that it said may be subject to tariffs.
In addition, Trump has told the Commerce Department to investigate whether imported autos and auto parts threaten America’s national security — the same justification the president invoked to impose tariffs on steel and aluminum. If the answer is yes, the administration says it could slap 20 percent to 25 percent tariffs on $335 billion of auto imports. Higher car prices for American consumers would inevitably follow.
Analysts say they’re becoming more convinced that Trump’s multi-front trade fights aren’t merely a short-term negotiating ploy. Rather, he may be prepared to wait as long as he feels it necessary to force other countries to adopt trade rules more favorable to the United States.
“People are underestimating what we’re headed for,” said Rod Hunter, a lawyer who served as a White House economic adviser under President George W. Bush. “He’s been saying since the ’80s that trade deals are bad and we should have more tariffs, and that’s what we’re getting.”
Moody’s Analytics estimates that if the tariffs were imposed on autos and most Chinese imports and other countries retaliate as expected, annual U.S. growth would slow by 0.5 percentage point by mid-2019. It expects that 700,000 jobs would be lost.
Global markets have remained generally calm despite the eruption of a full-blown U.S.-China trade war and the other conflicts Trump has ignited. On Friday, the Dow Jones industrial closed down slightly.
“I’ve been surprised that up until now, markets seem overly sanguine about the risks” of a trade war between the world’s two biggest economies, said David Dollar, senior fellow at the Brookings Institution and a former official at the World Bank and U.S. Treasury Department.
Investors as a whole appear to accept the argument of Trump economic advisers, notably Larry Kudlow and Kevin Hassett, that the president’s threats will likely force China, the European Union, Canada, and Mexico to eventually negotiate better trade deals.
But many analysts are skeptical that Trump’s tactics will produce such an outcome. Rufus Yerxa, president of the National Foreign Trade Council and formerly deputy director general of the World Trade Organization, said Trump appears to think that America’s trading partners will yield to pressure without securing any concessions in return.
“That isn’t how trade negotiations work,” Yerxa said.
China will likely retaliate if additional tariffs are imposed, economists note, rather than simply knuckle under. President Xi Jingping “cannot lose face with his own people by giving in to the United States,” Dollar said.