You are using an older browser version. Please use a supported version for the best MSN experience.

Trade War? What Trade War?

The Atlantic logo The Atlantic 5 days ago Chad P. Bown
Donald Trump, Xi Jinping are posing for a picture © Ahn Young-joon / AP

Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.

The tariffs are piling up. By December 15, President Donald Trump plans to hit nearly everything Americans buy from China with duties, covering 20 percent of total U.S. imports. Predictably, Beijing has retaliated by eliminating access to a 1.4-billion-person market that took soybean farmers and other American businesses years to develop. Relations with China are getting more toxic by the day. No deal is in sight.

And yet, although all the major watchdogs—the Fed, IMF, World Bank, and OECD—are certainly worried about the trade war’s impact on the global economy, so far, at least, it is hardly in a tailspin. And despite some shrieks of horror when the tariffs were first announced (from me included), there has been no real public outcry.

Were the doomsayers just paranoid? I don’t think so. The way the tariffs were structured explains why some of their negative influence has so far gone unnoticed, and the administration’s messaging explains why corporate America has so far kept relatively quiet. Although “so far” won’t last forever, by the time people start yelling, it may be too late to avoid serious economic damage.

[Annie Lowrey: How Trump thinks tariffs work (and how they actually work)]

The tariffs started slowly. In his first 18 months in office, Trump imposed new duties on less than 3 percent of Chinese imports. Since then he has ratcheted up coverage gradually, and in some cases he’s given importers time to bring in their goods before the tariffs hit.

The choice of which products to target and when has also softened the blow to American households. Earlier rounds of tariffs were mostly aimed at intermediate inputs, hidden from view. Companies faced with more expensive equipment or parts could choose to pass along their cost increase to consumers—or to accept lower profits or perhaps even push down wages.

More recent instances of Trump’s trade-war escalation will be much more difficult to swallow. For the first time, in September, tariffs will directly hit many items that American shoppers buy from Walmart or Amazon. The toughest times are still due to arrive, in December 2019. Trump decided to delay duties on toys, smartphones, and other consumer electronics until after the rush of this year’s holiday-shopping season.

Consumers, from their position of relative safety, have not screamed to stop the trade war. Moreover, even as prices increase more noticeably, they may remain sedate: They are notoriously impossible to mobilize politically.

It is perhaps more puzzling that America’s businesses have not put up a bigger fight, because they have borne the brunt of Trump’s tariffs.

Trump’s neutralization of the American corporate community began when he started the trade war in their name. The tariffs are supposedly in response to mistreatment of American companies by the Chinese authorities. That messaging campaign led some industry groups to praise the Trump administration’s tough treatment of China (though far fewer went so far as to endorse the tariffs).

[Read: Trump’s trade war with China is already changing the world]

The pushback has also been muted by the on-again, off-again, rhythm of Trump’s trade war, with near victories announced, and then unannounced, every few months. Whenever a deal seems imminent, hopes are raised that the tariffs are working, in the sense that they could extract meaningful concessions from the Chinese. Pushing Trump to get rid of them, in these moments, seems counterproductive—and the moments keep coming.

The president’s Twitter feed, meanwhile, has made clear the costs of public resistance. No one wants to be treated like General Motors was in late August, when Trump castigated the company for making cars for the Chinese market in China, or like Carrier and Harley-Davidson, which were the targets of earlier tirades.

Perhaps more important than rhetoric, the administration has set up an “exclusion” process after every round of duties—offering to at least temporarily exempt individual companies’ products from new tariffs. Firms have therefore had to choose between allocating their limited lobbying budgets to band with others and push back collectively—or go it alone for special treatment in the form of a product exclusion.

The attractions of going it alone are fairly obvious. For several thousand dollars, a company can get Washington lawyers to beg the administration to remove the Chinese import they need to buy from the tariff list. Receiving one of these temporary exclusions can be an economic lifeline—but pushing for one is incompatible with simultaneously criticizing the administration’s trade policy.

Incidentally, going it alone has been a bad bet for most. Christine McDaniel of the Mercatus Center reports that the administration had granted relief to fewer than one in four of the nearly 14,000 exclusion requests made as of July 30.

A final word should go to America’s mighty agricultural sector, where the Trump administration has effectively bought off its critics. Chinese retaliation hit soybean farmers hard—but handily, the U.S. Department of Agriculture’s Commodity Credit Corporation Charter Act allowed him to spray tens of billions of dollars of taxpayer subsidies at them, without needing to check with Congress.

The outcry, then, has not been at all proportionate to the possible damage Trump is inflicting on the economy. And now that the president has gone as far as he has without pushback, a couple of negative outcomes seem likely. The first is that Trump will never get a deal with China. Perhaps he never really wanted one at all. But he won’t back down, and his tariffs will become the new normal.

The second is that Trump is so emboldened, China is only the start. He has equally complained about trade with European allies, for example. His administration has already lined up all the legal authority he needs to slap devastating tariffs on tens of billions of dollars of German cars at a moment’s notice.

Before the public catches up to what’s going on, Trump could decide to take his China trade war global.

AdChoices
AdChoices

More from The Atlantic

image beaconimage beaconimage beacon