- Trump’s trade war with China is officially a joke.
- The World Trade Organization has just ruled that the Trump administration’s trade war with China violates the organisation’s trade rules – rules that the United States helped draft.
- That alone is not enough to plunge the trade war into complete absurdity.
- But add the fact that the US trade deficit has risen to its highest level in 12 years this summer and the fact that China is not meeting its purchasing targets and that China has not made any structural changes to its economy well. .
- The whole project looks completely ridiculous.
- This is a column of opinions. The thoughts expressed are those of the author.
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We can now officially say that Trump̵
Of course, there is only one reason, but this week we witnessed a graceful coup. The World Trade Organization – a body the United States once helped create – has ruled that Trump’s initial volley of tariffs on Chinese goods violated WTO rules. Symbolically, this decision crystallizes the fact that this trade war is a violation of US own principles.
In practice, however, this decision will not mean much to the administration. Trump and his staff will continue to act as if negotiations are continuing and that progress is being made. But the data do not show this. In July, the US trade deficit – a measure Trump says he will reduce by waging this trade war – rose to its highest level since 2008.
Then there is a first-phase trade agreement between the United States and China. Beijing has promised to buy huge quantities of US goods to close the trade deficit (again, it is not happening) and stimulate the US economy. But data from Chad Bone at the Peterson Institute for International Economics show that China is missing its target of buying American goods by a mile.
There are also few signs that Chinese politicians are working on the structural economic changes that Trump wants. In fact, since the coronavirus hit China, it has been targeting old, state-led ways to boost economic production. The same thing happened during the last financial crisis. To avoid the economic consequences, China has started pumping loans into state-owned enterprises and state-owned enterprises and infrastructure projects. According to a study in The Review of Financial Studies, which overturned part of the opening up of the Chinese economy that had taken place a decade earlier.
Probably this closure is happening again now during the economic crisis of the coronavirus. As noted by Michael Pettis, a financial professor at Peking University, before 2020, retail sales – a proxy for domestic consumption – are beginning to catch up with industrial production – which is dominated by state-owned enterprises – as an engine of economic growth. Industrial production is now growing much faster, despite the fact that China is enjoying more pink August retail sales.
Finally, the cost of the trade war is for American business and consumers. Last September, Moody’s estimated that the trade war cost the United States 0.3 percent of GDP and 300,000 jobs, and other analyzes found that Trump’s tariffs led to equally grim job losses.
In May, the Federal Reserve Bank of New York estimated that the trade war had shaved off $ 1.7 trillion in US stock prices. Trump walked into the office, saying his trading tactics would bring American production back, but 2019 was the worst year for the sector since the financial crisis.
So, for review: The trade war with China has failed to achieve the Trump administration’s goals of changing the Chinese economy, narrowing the trade deficit, and / or bringing production back to the United States. The agreement that produced it is not respected. And the United States has been corrected by the WTO – an organization that again helped to design – for violating international trade rules, which helped to write.
How is this not a joke?
This is a column of opinions. The expressed thoughts belong to the author (authors).