U.S.-Chinese Trade War: What Happened to ‘America First’?August 25, 2019
Uncertainties infused into the global economy by the trade war probably have helped to produce a global slowdown and fears of an approaching recession.
In a trade war, as in a real one, people are wounded by friendly fire from their side. Consider some casualties in Donald Trump’s “easy to win” — his promise — trade war. Begin with the company whose green machines bear the name of the blacksmith who, in the 1830s in Grand Detour, Ill., invented a self-scouring plow that could turn the Midwest’s heavy black top soil.
Is the John Deere corporation “tired of winning,” as Trump promised that all Americans soon would be? Not exactly. The Wall Street Journal reports that U.S. farmers are purchasing fewer farm machines — Deere’s profits from this business are down 24 percent from a year ago — partly because farmers’ incomes have suffered as a result of the tit-for-tat trade spat that Trump started with China, which has included China canceling the purchase of almost 500,000 metric tons of soybeans. Some good news for John Deere might be ominous news for U.S. farmers: Equipment sales to Brazil and Argentina are up, perhaps partly because China has increased purchases from those nations’ farmers, who are American farmers’ competitors.
Nowadays, even sensible government actions injure some farmers. Many of them have come to depend on government’s misguided mandate regarding ethanol in gasoline, and the Journal reports that 31 refineries have been given ethanol waivers from the Environmental Protection Agency. The Iowa Corn Growers Association says the exemptions could eliminate “nearly one billion bushels of corn demand.” Whether ethanol would have achieved sacramental status in Washington if Iowa did not have presidential caucuses is a subject for another day.
Home Depot, the world’s largest home improvement retailer (more than 2,000 stores in North America), partly blames the trade war for its lowered growth expectations. The tariffs, which the Financial Times accurately refers to as “import taxes,” will, according to a JPMorgan estimate, cost the average U.S. household “around $1,000 a year.” If so, this Trump tax increase — it is his alone — is more important to the average American than his (actually Congress’) tax cut.
The Financial Times recalls that “hundreds of U.S. companies and trade associations said in a joint communique in June that the proposed duties would cause the loss of two million jobs and reduce U.S. economic output by 1%.” The losses and reduction are related to the fact that, as Allan Golembeck of the White House Writers Group notes, “Over 60% of U.S. imports are used by businesses in their products and production processes.” Hence Trump’s tariffs make U.S. goods more expensive, thereby dampening U.S. consumer activity. And exacerbating trade…