Uneasy riders

by Paul Holmes (paulh@talkbusiness.net) 157 views 

Do you remember those cross-country car trips, crammed in the back seat of the non-air conditioned family station wagon next to a baby brother you claimed you couldn’t stand?

And remember how your back-and-forth nudges with the elbows progressed into punching each other on the biceps, and further escalated until your parents threatened to stop the car and line everybody out? And, that the more culpable party always protested that he didn’t start it but was only retaliating against the original aggressor?

Yes, I thought you did.

Though it’s infinitely more serious, last month’s round in the nudgefest between the two world heavyweights of trade certainly bears some comparison to the perpetual feud between siblings who, deep down, really can’t live without each other, though neither would dare admit it.

In case you missed it on Sept. 24, President Donald Trump’s administration put into effect another round of tariffs against Chinese goods coming into the United States — a 10% duty on an additional $200 billion of Chinese imports that would eventually rise to 25%. Beijing then reacted by slapping retaliatory tariffs on $60 billion worth of U.S. goods.

The president  also warned our giant trading partner to the east that the United States would “immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports” — covering virtually all of China’s exports to the United States. The day before the latest mutual elbow nudges to the ribs by the two riders in the world trade wagon, the Chinese took out a four-page advertising section in Iowa’s largest newspaper, telling farmers that the impact on the state’s soybean farmers is “the fruit of a president’s folly.’’

The four-page section in the Sunday, Sept. 23, edition of the Des Moines Register, which carried the label “paid for and prepared solely by China Daily, an official publication of the People’s Republic of China,” featured articles including one outlining how the trade dispute is forcing Chinese importers to turn to South America instead of the U.S. for soybeans.

Trump blasted the Chinese for “actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me.”

Indeed, the Heartland farm belt that runs generally north and south along both sides the Mississippi River takes in not only Iowa — home of  extremely early political party caucuses — but a number of other “red” states, including Arkansas, where Trump enjoyed large margins of victory in the 2016 election.

Iowa’s corn, soybean and hog sectors will lose between $1.68 billion and $2.2 billion in revenues because of the trade tussle, according to a recent study by Iowa State University. The state is the top U.S. producer of corn and pork, and a leading producer of soybeans, eggs and poultry.

“What China does not understand is that these people are great patriots and fully understand that China has been taking advantage of the United States on trade for many years,” Trump declared in a recent series of tweets.

Many Trump backers believe the situation is less a war Trump started but instead an effort to right an unfair situation that has existed for far too long. The United States may have to suffer some short-term pain, the thinking goes, but it will be in our long-term best interest to get tough with China and start closing the extremely wide trade gap between the two countries. Supporters of the effort say tariffs — which Trump earlier described in a tweet as “the greatest” — are already bearing fruit by wringing trade concessions from Europe and Mexico. The same, they reason, should happen in our trade with China.

It appears the administration wants to press the advantage it believes it holds for the moment in the trade dispute, evidenced by some slowing in the Chinese economy at a time when the U.S. economy is robust. The White House has indicated China, pinned between the younger brother’s elbow and the back seat armrest, could wriggle out of its painful position by allowing U.S. firms greater access to the Chinese market and dropping its requirement that American companies give valuable technology to Chinese partners.

Some trade analysts, however, fear that instead of softening the Chinese, the new tariffs will have the opposite effect, strengthening Beijing’s resolve against what Chinese officials describe as bullying by the United States. The two sides were expected to meet soon in Washington, but that meeting seems unlikely to happen.

During six days of hearings conducted in August by the United States Trade Representative, representatives of a number of firms warned that the additional $200 billion in tariffs could drive higher the cost of consumer goods in the United States while hobbling their businesses. The United States does not have the capability to produce many of the materials they depend on for their products, some company leaders said at the hearings. They told the trade representative that most manufacturing and production has shifted to facilities outside the United States, making American firms dependent on imported materials, including those from China. Gearing up to produce domestically what is made overseas would take years, they noted.

So, it appears neither of the uneasy riders in the back seat of the world trade wagon wants to knuckle under, and their fight is likely to be long and painful.

Too bad Dad can’t stop the car and make them get along.
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Paul Holmes is editor-at-large of the Northeast Arkansas Talk Business & Politics.

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