Howes: Trump's tariff tear on China intensifies
President Donald Trump says American consumers and businesses don’t pay more to offset the effects of his beloved tariffs — the Chinese do. But the real world doesn’t agree.
The National Pork Producers Council says "U.S. pork has suffered from a disproportionate share of retaliation due to trade disputes with Mexico and China" and that producers are losing money. Farmers and their representatives in Congress are outraged at the drubbing Trump's tariffs are delivering to the prices of their commodities. Detroit's automakers, huge consumers of steel, say the tariffs on foreign metals are pushing U.S. prices higher, too, trimming auto profits by a billion dollars or so.
Who says consumers and businesses don’t pay, Mr. President? Yet here we are, bystanders to a transpacific test of wills that is spooking markets, slamming farmers, raising concerns about slowing economic growth and leading automakers to wonder just how much more the multi-front trade war is gonna cost them and their shareholders.
A lot, most likely. Now the president is facing a Saturday deadline to decide whether to slap import tariffs on foreign vehicles and parts, a move that would hit yet again the Detroit automakers he professes to support — even if he does postpone the decision another six months, as Bloomberg and other outlets reported Wednesday, perpetuating continual uncertainty.
Just what a strong economy boasting the lowest unemployment in 50 years needs: a big, fat reason to question the staying power of a recovery that is Trump's best argument for re-election. As much as the global auto industry — including Detroit — theoretically might welcome a six-month delay in tariffs on foreign vehicles and parts, the delay amounts to one big, fat dose of ambiguity.
Catastrophic? Not for an economy producing jobs, generating growth and containing inflation ... so far. But bullish sentiment can be undermined as much by perception as reality, and the perception is that the president and his Chinese counterpart are moving into a phase in their trade war likely to give both sides little room to maneuver without looking like the loser.
To ease the anxiety, Treasury Secretary Steven Mnuchin told a Senate hearing that the United States "is close to an understanding with Mexico and Canada" that would roll back U.S. tariffs on their steel and aluminum. They'd better, because both countries have signaled they would not be able to ratify the successor to the North American Free-Trade Agreement without elimination of the tariffs.
And the chairman of the Senate Finance Committee, Iowa Sen. Charles Grassley, last month vowed to block passage of the so-called NAFTA 2.0 unless the steel and aluminum tariffs are lifted. All of which is probably why the president is withholding a call on the auto tariffs and seeking to lift the levies on foreign steel and aluminum: with the stakes rising in the trade battle with China, he needs some wins and some semblance of an ally or two.
Easier said than done. Trump's pugilistic unilateralism on trade wins few friends in foreign capitals. And it's not clear his style will, in fact, yield the results he so confidently promises. Almost midway through the third year of his presidency, his administration has not delivered a revised NAFTA, has not improved terms with Japan and the European Union, has not reached agreement with China, the world's No. 2 economy.
Instead, the president is performing his own Heat & Light Show — he'll turn up the heat until he's persuaded Beijing sees the light. Late Wednesday, Trump signed an executive order barring American telecommunications companies from deploying network hardware made by foreign companies, especially China's Huawei Technologies Co. and ZTE Corp.
At what point, wonders Chinese auto industry consultant Michael Dunne of Hong Kong-based ZoZo Go LLC, does China train its retaliatory ire on Detroit's automakers: "Will leaders of the People's Republic encourage Chinese consumers to boycott GM, Ford and FCA products as a form of trade war retaliation?
"China's top officials would not hesitate to pull that lever," he wrote in the latest edition of his "The Chinese are Coming" newsletter. "Just ask Korean and Japanese automakers. Their sales plummeted in recent years during periods when Korea and Japan made political decisions that were not aligned with Chinese interests."
American business would pay for that, too.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 p.m. and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.