Trump is trumped in a trade war

Mark Lane | 8th March 2018

WASHINGTON – The price of jeans in Europe may rise by 25 per cent if the European Union and other trading partners impose tariffs on American-made products in retaliation to US aluminium and steel tariffs, expected to be 10 per cent and 25 per cent respectively. President Trump is also said to be weighing up tariffs on various Chinese imports, including shoes and clothing.

This is a battle the US cannot win, for the horse has long since bolted. The US needs Chinese clothing imports as the US production-line has shrunk to just a tenth of its former size since the 1990s. Domestic production has no hope of taking up the slack. Moreover, even if domestic industry can replace some of China’s imports, other producers from South East Asia are poised to replace them, tariffs or no tariffs.

China holds all the cards here. As Bloomberg recently reported, China imports mainly intermediate products and parts from the US and, in many cases, could destroy parts of US industry if it chose to retaliate. Bloomberg notes: “A quarter of US chip exports go to China, but that constitutes just 3.8 percent of the People’s Republic’s total imports of integrated circuits. A relatively small shift in Chinese business patterns could deliver a devastating blow to one of America’s most successful export trades.”

China can afford to sit on its hands in a trade war. The US will blink first.

Image: Wikipedia