Trump Trade Wars: A Look At Winners And Losers Since 2016

by Tom Orlik (Bloomberg) Who Loses in Trump’s Endless Trade War? In 2016, Donald Trump campaigned for the US presidency on a promise to beat China. Once in office, he unleashed a barrage of tariffs and export controls without precedent in recent memory. Holding fast to a vote-winning strategy, in his 2024 campaign he’s promising to go further, with tariffs of 60% on all Chinese imports.

Nor could anyone accuse Joe Biden of being a panda hugger. New levies—focused on electric vehicles, batteries and solar cells—have been added to the Trump tariffs. Export controls aim to block China’s access to leading-edge semiconductors. Vice President Kamala Harris has yet to set out a detailed China plan, but more of the same seems like a reasonable bet.

Duties from Trump’s first term—25% on hundreds of billions of dollars’ worth of Chinese goods—have already dealt a significant blow to bilateral trade. China’s share of US imports has fallen from a high of 21% when Trump was elected to 14% in 2023. An across-the-board tariff of 60% would likely choke off Chinese exports to the US almost entirely, according to Bloomberg Economics’ analysis using a World Trade Organization model.

A Trade War With No End in Sight

That would unquestionably hurt China’s economy, which is already in the throes of a slow-motion real estate meltdown. One local economist told me prices in his Shanghai neighborhood are down 20% from the 2021 peak. That’s roughly on par with the average drop nationwide during the US housing crash. Buoyant exports are one of the only things preventing China’s economy from tipping into recession.

Escalating the trade war would also be destructive to the US. Based on the tit-for-tat pattern during Trump’s first term, we can expect Beijing would retaliate. Tariffs at 60% on US shipments to China would take US sales down to zero—an annual loss of about $150 billion.

Also read: A New Trade War Offers No Easy Way Back for Old Global Order

American farmers, who count China as their largest export market, would almost certainly get caught in the crossfire, as happened during the initial phase of Trump’s trade war. The former president had to funnel billions to growers of soybeans, corn and other crops to appease a key Republican constituency. Previously untouched US businesses—including Apple Inc. and Tesla Inc., which both derive about one-fifth of their sales from China—also could find themselves dragged into the conflict.

Trump’s view is that tariffs are a tax on China. In fact, they’re also a tax on US consumers, adding to the price tag for everything from toys to tablets. How much would prices rise? Plug 60% tariffs—and the 20% Trump is threatening on the rest of the world—into the WTO’s model, and it shows that by the time of the 2028 election US prices would be about 4% higher than if policy settings remained unchanged.

Models, of course, don’t get everything right. When Trump introduced the first set of China tariffs in 2018, the impact on inflation was hard to discern. China’s currency, the yuan, depreciated relative to the dollar, offsetting some of the increase in the cost of imports. Many US retailers elected to absorb the additional expense rather than burden their customers. Even so, a jump from 25% to 60% tariffs on all shipments from the world’s factory is a lot. Model results and common sense align in pointing to a blow to growth and boost to inflation.

Security hawks argue that significant economic costs would be a price worth paying to stave off the existential threat posed by China’s rise. Here, too, the arguments don’t stack up. Since Trump’s first term, the US has hit China with a wave of tariffs and sanctions. They may well have slowed China’s advance toward what economists call the technology frontier. But they haven’t stopped it.

In 2015, Chinese President Xi Jinping’s team unveiled “Made in China 2025”—an ambitious plan to seize control of the technologies of the future. Industrial planners in Beijing aimed to accelerate the transition from low-value assembly to high-value advanced manufacturing. From semiconductors to industrial robots, airplanes to wind turbines, they set targets for China to make more at home and sell more abroad.

From a public-relations perspective, the plan was a disaster. It was one thing for China to dominate textiles and tchotchkes. The prospect of the Communist Party gaining control of strategic technologies such as semiconductors was a different matter. In foreign capitals and corporate boardrooms, Made in China 2025 set alarm bells ringing loudly.

A decade on, it’s clear that international opprobrium didn’t stop China from making rapid progress. Investment in target sectors is up sharply. By 2025 the country will be graduating 77,000 science, technology, engineering and math Ph.D.s a year, according to the Center for Security and Emerging Technology—close to double the 40,000 a year in the US. In 2019, China overtook the US in international patent filings; by 2023 it was ahead by about 40%.

Of course, such metrics can be misleading. Maybe China’s investment is mistargeted and wasteful. Maybe its Ph.D. graduates are book smart but not street smart. Maybe its patents are for incremental innovations, not game-changing technologies.

Trade data provides a reality check—and confirms progress isn’t a mirage. China’s share of global electric-vehicle exports, for example, has risen from low single digits in 2017 to almost a quarter in 2023. Jörg Wuttke—a partner at DGA Group and the former president of the European Union Chamber of Commerce in China—told me Germany’s automakers are now the students, not the teachers, of their Chinese rivals.

For the US, and the rest of the world, the implications are far-reaching. The first is that big economies with extensive global ties and competent policymakers aren’t easily knocked over—even by the world’s most powerful nation. That’s true of Russia, where Vladimir Putin’s war machine continues to grind on despite sweeping Western sanctions. It’s also true of China. Trump’s threat of 60% tariffs would throw more grit in China’s wheels, but not stop them turning.

Second, industrial planning can work. Free-market economists sneer at state interventions, agreeing with Ronald Reagan that the nine most terrifying words in the English language are: “I’m from the government, and I’m here to help.” In fact, China’s ecosystem of industrial planners, state banks, government-owned enterprises and private entrepreneurs has been demonstrably successful in driving development.

No doubt, bad behavior demands a response: China doesn’t get to maintain protectionist barriers at home while enjoying open access abroad. But whether it’s Trump or Harris who gets the job, the next US president would be well-advised to spend more time and energy on speeding America’s advance and less on trying to slow China’s.

by Tom Orlik the chief economist for Bloomberg Economics. He’s the author of “Understanding China’s Economic Indicators” – a guide to China’s economic data. He is based in Washington DC., following more than a decade in Beijing.
© 2024 Bloomberg L.P.

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