Trump’s China Tariffs Boomerang on America
LONDON (Bloomberg) - As resilient as the U.S. is with unemployment at a 50-year low of 3.5% and personal income up 15% since 2017, cracks are widening in the longest expansion in modern times. Deteriorating business investment, manufacturing, shipping, trucking, logistics and the historically robust trade surplus can all be attributed to the tariffs threatened and imposed by Donald Trump since he became president.
Trump protectionism initially included tariffs of 25% and 10% on steel and aluminum, prompting retaliatory penalties from China, the European Union, Mexico and Canada. Almost everything Americans now buy from China is penalized or targeted for tariffs.
Instead of fortifying the economy, Trump’s trade wars taxed chief executive officers (and farmers) with so much financial and geographical disruption on products from medical devices to soybeans that it has made companies eschew new American plants and equipment.
Even the Trump tax cut that was supposed to invigorate animal spirits was reduced to insignificance by the chaos created by the tariffs. That’s why Real Private Nonresidential Fixed Investment calculated by the U.S. Bureau of Economic Analysis is down more than 2.5% in the third quarter this year.
Since Trump took office, the best month in U.S. manufacturing production was September 2018, when it increased 3.5% over the previous year. Then it began to shrink this year. The most recent reading: Manufacturing production declined 1.5% in October 2019 from a year ago. This drop in the growth rate in 13 months is the sharpest since September 2011.
Trump is the first president since the Great Depression to assail globalization, which benefits corporate America with an overwhelming 56% share of the market value of the world’s 500 biggest companies. Global trade, measured by the 5-year average of exports, fell 2.6% to $17.6 trillion after reaching the high of $18 trillion in 2015 -- the first decline since 1969 when such data was collected.
The retreat in global exports hasn’t marked a turning point for China, Trump’s nemesis on trade. Since 2016, China’s 5-year rolling average of exports increased 8% to $2.4 trillion, while the U.S. was little changed at $1.5 trillion, according to data compiled by Bloomberg.
Trump protectionism initially included tariffs of 25% and 10% on steel and aluminum, prompting retaliatory penalties from China, the European Union, Mexico and Canada. Almost everything Americans now buy from China is penalized or targeted for tariffs.
Instead of fortifying the economy, Trump’s trade wars taxed chief executive officers (and farmers) with so much financial and geographical disruption on products from medical devices to soybeans that it has made companies eschew new American plants and equipment.
Even the Trump tax cut that was supposed to invigorate animal spirits was reduced to insignificance by the chaos created by the tariffs. That’s why Real Private Nonresidential Fixed Investment calculated by the U.S. Bureau of Economic Analysis is down more than 2.5% in the third quarter this year.
Since Trump took office, the best month in U.S. manufacturing production was September 2018, when it increased 3.5% over the previous year. Then it began to shrink this year. The most recent reading: Manufacturing production declined 1.5% in October 2019 from a year ago. This drop in the growth rate in 13 months is the sharpest since September 2011.
Trump is the first president since the Great Depression to assail globalization, which benefits corporate America with an overwhelming 56% share of the market value of the world’s 500 biggest companies. Global trade, measured by the 5-year average of exports, fell 2.6% to $17.6 trillion after reaching the high of $18 trillion in 2015 -- the first decline since 1969 when such data was collected.
The retreat in global exports hasn’t marked a turning point for China, Trump’s nemesis on trade. Since 2016, China’s 5-year rolling average of exports increased 8% to $2.4 trillion, while the U.S. was little changed at $1.5 trillion, according to data compiled by Bloomberg.