“These tariffs are essential to preventing further unfair transfers of American technology and intellectual property to China, which will protect American jobs,” Trump said. “In addition, they will serve as an initial step toward bringing balance to the trade relationship between the United States and China.” China responded almost immediately, saying it will retaliate against the tariffs at the same scale.
Trade between the U.S. and China, the world’s largest and second-largest economies, respectively, amounted to about $648.5 billion in 2016, according to the U.S. Trade Representative. But the U.S. buys far more from China, mainly in the forms of consumer goods like electronics and household goods, than China buys from the U.S. This means that in 2016, the U.S. had a trade deficit with China of about $385 billion.
Deficits have long been an irritant for Trump, who views them as detrimental to the U.S. economy. He says he believes that reducing trade deficits—by increasing U.S. exports to other countries—would create more jobs at home, and that it’s tariffs that will ultimately force America’s trading partners to buy more American-made goods. But most mainstream economists from across the political spectrum say deficits do not matter as much as people think they do, and that deficits are based on a variety of factors including the value of a nation’s currency and how much its citizens save. Tariffs, though, result in trade wars that result in higher prices across the board for all consumers.
But where Trump is likely to have the support of economists as well as voters is his critique of China’s trade practices as unfair. China has been accused by the U.S. and others of, among other things, intellectual-property theft, dumping steel and other manufactured goods, tightly controlling its currency, and of giving its conglomerates unfair government support. All this, combined with a low-cost labor force, lax regulatory framework, and poor environmental standards, has occurred alongside the decline of U.S. manufacturing. Yet the causal relationship is not straightforward—many economists primarily blame automation, rather than competition from China or other low-wage countries, for the bulk of the loss of U.S. manufacturing jobs over time.
Reihan Salam argued in The Atlantic last week that the normalizing of trade relations between the U.S. and China had some detrimental effects on both countries. It was detrimental to the U.S. because there was indeed some loss of manufacturing jobs to China, and detrimental to China because the U.S. no longer raises human-rights concerns in the same way as it once did with what is essentially its largest trading partner and foreign creditor. In the pre-normalization era, the status of trade with China had to be renewed each year, ensuring that questions about the country’s human-rights record in Tibet and elsewhere were raised annually.