WASHINGTON—U.S. business leaders and some of President Donald Trump’s Republican allies are warning that increased tariffs on Chinese goods will bring economic pain to agricultural and manufacturing regions in the country where the president has enjoyed strong support.
The Trump administration announced last week it would increase tariffs from 10 percent to 25 percent on Chinese imports worth $200 billion and begin the process of imposing tariffs on all Chinese goods coming into the United States. Trade talks with Beijing broke down over China’s refusal to commit to U.S. demands on intellectual property rights, market access, and other sticking points. China in turn has leveled further retaliatory tariffs on U.S. imports.
U.S. business leaders have long sought changes to Chinese policies the United States deems unfair but have warned against the heavy use of tariffs to force China’s hand, noting that domestic companies and ultimately consumers would pay the costs.
“We want to see meaningful changes in China’s trade practices, but it makes no sense to punish Americans as a negotiating tactic,” said David French, a lobbyist for the National Retail Federation.
The Federal Reserve Bank of New York said consumer prices were higher last year as a result of the tariffs, and a study by Trade Partnership Worldwide found that Trump’s proposed tariffs on all Chinese imports could cost a U.S. family of four a total of $2,294 annually in increased expenses on household items, electronics, and other goods.
An economic analysis by the Brookings Institution concluded much of the burden of earlier rounds of retaliatory tariffs by China and other trading partners has already fallen disproportionately on agricultural and metal producers in rural areas and small towns that supported Trump in 2016.
“Trade policy is inextricably linked with politics, and the retaliatory tariffs seem geographically and industrially targeted to mobilize political angst,” the study found, noting that “counties that voted for President Trump are more exposed to the tariffs.”
In a letter to the president, Zippy Duvall, the head of the American Farm Bureau Federation, warned that the trade war was adding to economic uncertainty faced by farmers, “slashing our exports, destroying a once-promising market for agriculture, worsening the farm economy, and contributing to high levels of stress and uncertainty for many farm and ranch families and other Americans whose jobs are connected to agricultural production.”
Sen. Chuck Grassley, R-Iowa, pointed out the burden on his state’s farmers even as he called on China to end unfair practices and forcefully denounced the use of tariffs for contributing to global instability.
“As I like to tell the president when he says he likes tariffs, I try to remind him that Smoot-Hawley brought about the Great Depression, brought about Adolf Hitler, brought about World War II, brought about 60 million people losing their lives as a result of it,” he said this week at the National Association of Farm Broadcasting, referring to taxes on imports put in place in 1930. Grassley noted that the reduction in tariffs after World War II helped to increase standards of living around the globe.
The Peterson Institute for International Economics warned the additional penalties threatened by the president could push tariffs to levels like those imposed by Smoot-Hawley on an array of goods from clothing to electronics.
“Is his objective to negotiate a trade deal, or is it to make tariffs on Chinese goods a new normal in U.S.-China relations?” economists Chad Brown and Eva Zhang wrote. “The only certainty at this stage is that Trump’s tariffs are escalating toward historic levels.”
The president wants to level the playing field for U.S. companies and workers affected by Chinese misbehavior such as the theft of intellectual property and restricting access to its markets. The tariffs are aimed at pressuring China to change its ways by making its goods less attractive to U.S. consumers. “I think it’s going to turn out extremely well,” Trump told reporters Tuesday, declaring the United States was in a “very strong position.”