Trump's delusions on his ability to inflict pain on China with his tariffs (thread)
Trump is of course bragging about his trade deal with China. It is good news that we may not see further tariff hikes for the time being, but it is not clear the U.S. got much.
First, there is a simple way to measure the impact of the promises of big agricultural purchases by China. We can look at the price of major farm commodities.
With soybeans, there has been a modest uptick, but prices are still below their 2018 levels, before the trade war began macrotrends.net/2531/soybean-p…
here's the picture with wheat macrotrends.net/2534/wheat-pri… Perhaps a bit more evidence of a market response to the deal, but prices are still well below where they were through most of the Obama years. (High dollar has much to do with this.)
After running around the country for two years yelling about China being a "world class currency manipulator," Trump has apparently raised the white flag on currency, removing China from the list of countries that are identified as "currency manipulators."
Trump doesn't seem to realize that when he puts tariffs on imports from China he is primarily hitting working class people here who pay the tariffs not China.
This is easy to show; the price of goods imported from China barely fell over the last year in in response to tariffs of 10-25 percent bls.gov/news.release/x…
Furthermore, Trump seems to think that the threat of future tariffs gives him some great weapon to enforce the terms of this deal and demand further concessions. What he misses is that the U.S. market is rapidly dwindling in its importance to China.
In 2016, China's good exports to the U.S. were $462 billion census.gov/foreign-trade/… As many have pointed out, much of the value of these exports came from elsewhere. For example, most of the value in an iPhone exported to the U.S. goes to Apple for design, not China for assembly
If we are seriously trying to evaluate China's impact on the U.S. economy, we have to add in the Chinese value-added in items imported from Japan, Europe, & elsewhere. But for this discussion that doesn't matter. We don't put tariffs on the Chinese value-added in goods from Italy
Let's say that China's value-added in goods imported from China is 70 percent.This means Chinese value added in the $462 billion in exports to the U.S. in 2016 was $323 billion or 2.9 percent of China's GDP in that year imf.org/external/pubs/… (dollar value is probably best here)
It looks like China's exports to the U.S. for 2019 will be roughly $460 billion, which would translate into $322 billion assuming 70 percent Chinese value added census.gov/foreign-trade/…
China's exports to the U.S. look to have been roughly $460 billion in 2019 census.gov/foreign-trade/… Using the 70 percent Chinese value-added assumption, that comes to $322 billion.
This comes to 2.1 percent of the $15.3 billion GDP projected for China for 2020 imf.org/external/pubs/…
If Trump thinks that China will restructure its economy to protect the 2.1 percent of its GDP that it exports to the U.S., he is even more out to lunch than is generally believed.
