Let’s say a man, without warning one night, slashes all four tires on your car. You’re living on a tight budget and you can’t afford the cost of four new tires. Suddenly, you’ve been put in a jam when it comes to transportation.
After months of worry and uncertainty, the man returns one night and replaces one of your flat tires. One could argue, I suppose, that things are looking up, but negotiating streets and highways in your car remains a challenge and you long for those good ol’ days when driving was much easier on four fully-inflated tires.
Now imagine that your car represents our trade policy with China. President Donald Trump has done much to hamstring that policy. In March 2018, the president began imposing tariffs on Chinese goods — in a bid to force Beijing to abandon its trade policies.
In the world of poor analogies that I’ve created here, it’s as if the president slashed all four tires on your car with the belief that eventually the car would someday run like a Cadillac.
On Wednesday, Trump and Chinese Vice Premier Liu He signed a partial trade deal, calling a truce in a conflict that has shaken the global economy.
Wednesday’s White House ceremony will mark a political triumph for the president as he prepares for a reelection fight. His long-sought deal with Beijing also could produce a windfall for American farmers, energy producers and manufacturers if $200 billion in new Chinese purchases materializes over the next two years as U.S. officials hope.
Noem announced in her State of the State address Tuesday that kicked off this year’s session of the South Dakota Legislature in Pierre that she would be making a special trip to Washington to take part in this ceremony.
“I'm traveling to Washington to join President Trump at the White House as he signs this important agreement tomorrow. And I won't be going alone; I've asked Jerry Schmitz, a South Dakota soybean producer, and Craig Andersen, a South Dakota pork producer, to join me,” the governor said Tuesday. “We will all be there as the President locks in this new agreement and opens up new opportunities for South Dakota ag products.”
They will be there to watch President Trump partially fix a problem that he created.
The “phase one” deal is expected to provide relief for farmers, who have struggled since China stopped buying huge amounts of soybeans and other commodities as the trade war ramped up. The White House said China would buy up as much as $50 billion in agricultural products as part of the deal.
While that will give much-needed relief, critics say it’s not enough.
“This can’t be phase one and done,” said Brian Kuehl, co-executive director of Farmers for Free Trade, an anti-tariff group, in a report published in The Hill earlier this week.
“With over 80 percent of the tariffs still in place, the cost to American farmers, businesses and consumers will continue to grow,” he added.
As the White House, with the help of Gov. Noem, celebrates the president’s negotiating accomplishment, the phase one deal offers little relief for countless U.S. businesses — including chemical makers, apparel retailers and auto parts manufacturers — that will still face the same punishing tariffs they have confronted for some time.
The Washington Post spells out the many challenges that remain as the ink dries on the phase one deal and Gov. Noem returns to Pierre.
From the Rust Belt to the Pacific Northwest and from the Gulf Coast to Niagara Falls, the outlook could not have been brighter for U.S. chemical companies, the Post reports.
Then President Trump nearly two years ago launched his trade war with China.
The phase one deal offers little relief for countless U.S. businesses — including chemical makers, apparel retailers and auto parts manufacturers — that will still face the same punishing tariffs they have confronted for some time.
Back in 2018, chemical companies were building dozens of new plants and creating tens of thousands of good-paying jobs around the country.
Thanks to inexpensive shale gas, U.S. chemical makers finally were poised to shed their high-cost reputation and become the world’s preferred supplier.
But among the targets of the president’s tariffs were the Chinese raw materials that U.S. plants use to produce industrial chemicals and plastics. China retaliated with its own import taxes, closing off the industry’s fastest-growing export market.
Chemical makers such as Eastman laid off workers or delayed investments. Unable to find alternatives to their Chinese suppliers, others such as Celanese passed along price increases to their customers in the automotive, agricultural and construction industries, as the trade war’s impact rippled across the economy.
The Post report states that the president repeatedly says that China is paying the cost of the tariffs, a claim that is contradicted by several studies and most economists.
CNN notes that the cost of the tariff comes directly out of the bank account of an American importer when the good arrives at the port.
US companies have paid $46 billion more in tariffs than they would have without Trump's tariffs, according to an analysis of government data by the free-trade coalition called Tariffs Hurt the Heartland. American importers can choose to eat the cost of the tariff, or pass some -- or all -- of it along to the consumer.
It's possible that some Chinese manufacturers lowered their prices in order to stay competitive in the US market. But at least two papers released last year suggested that US companies and consumers are bearing the brunt of the tariff cost.
Already, Trump’s tariffs have been a net drag on the economy and failed to achieve his stated goal of boosting domestic manufacturing, according to a new study by two Federal Reserve Board economists, Aaron Flaaen and Justin Pierce.
Any jobs saved or created in U.S. industries protected by tariffs are more than offset by jobs lost in companies that suffer higher input costs or lose export sales because of retaliatory tariffs, concluded the study, which was released last month.
“The tariffs have not boosted manufacturing employment or output, even as they increased producer prices,” the study found.
Years of rampant piracy, trade secrets theft and discriminatory treatment left many American executives eager for a confrontation with Beijing. Many welcome the deal that will be unveiled Wednesday with White House fanfare. But the persistence of the president’s favorite negotiating tool means any applause will probably be muted.
“There is an expectation that tariffs are going to be with us for a while. Nobody’s happy with that expectation,” said Stephen Lamar, president of the American Apparel and Footwear Association. “In fact, they’re quite upset.”
The Hill reports this week that businesses are concerned that Trump’s “phase one” China trade deal will not be followed by a more substantial phase two, leaving a slew of tariffs in place for at least another year.
The concerns are being raised in part because of the difficult issues that would have to be resolved between Beijing and Washington to win a stage two deal.
“I think there’s a real risk that there won’t be a phase two deal,” said David French, senior vice president of government relations for the National Retail Federation. “They reserved the hard stuff for phase two.”
Many of the tough tariffs that Trump put in place to pressure China to negotiate a deal in the first place remain in place after Wednesday, raising prices on imports. So are most of the retaliatory tariffs China has imposed on American products.
A common view in business circles is that the greatest accomplishment of the phase one deal was to halt and slightly scale back the destructive trade war that Trump himself started, The Hill reports. Business groups say they are relieved that the period of uncertainty and escalation seems to have slowed.
Noem perhaps felt safe being in Washington while the South Dakota Legislature begins its 2020 session because, even though farmers lost one of their biggest export markets thanks to the tariffs on China, a recent survey found that farmer sentiment is higher than it has been since 2016 and the US Department of Agriculture projected that farm income will be up 10 percent this year, to the highest level since 2014.
That's largely due to a bailout from Trump. His administration has given about $28 billion -- about double the cost of the 2009 auto bailout -- to farmers hurt by the Chinese tariffs. The payments aren't meant to make up for their total losses, but it's helping bridge the gap.
Without government payments, which are expected to be up 64 percent in 2019, farm income would have actually shrunk.
Trump's aid payments aren't saving everyone. Farm bankruptcies are up 24 percent compared to the year before, according to the American Farm Bureau.
To secure the trade deal that Noem helped celebrate Wednesday, Trump agreed to suspend a planned December tariff on about $162 billion in Chinese goods and to cut in half an existing 15 percent levy on imports worth an additional $110 billion.
But the tariffs that remain in place will still cover the same $360 billion in Chinese goods that the administration taxed before the signing. Nearly two-thirds of everything Americans buy from China will be tariffed, compared with less than 1 percent before Trump began his anti-China campaign, according to calculations by economist Chad P. Bown of the Peterson Institute for International Economics.
This is hardly worth celebrating.
We would have preferred that the governor had stayed home to carry out the role as the state’s chief executive -- especially as the state Legislature convenes in Pierre.