More tariffs. We’re getting numb to it by now, with new developments every week or two. So it makes sense to step back, assess where the Trump trade wars stand, and estimate how much further they could go.
The Trump administration announced on Aug. 8 that it will impose 25% tariffs on an additional $16 billion worth of Chinese imports, as expected. China, in response, said it would do the same to a like amount of American exports to China. So far, Trump has hit about $52 billion worth of Chinese imports with new tariffs, with China retaliating in kind.
That’s in addition to tariffs Trump has imposed on steel and aluminum imports from most countries, and a few other select tariffs. Europe, Canada, Mexico and a few other countries have retaliated against the U.S. measures, in addition to China. But that hasn’t shaken Trump. In fact, he has threatened to slap tariffs on about 6 times as many imports as he has done so far, which would be a whole new level of trade warfare.
Overall, Trump has imposed new tariffs on about $107 billion worth of imports, and threatened tariffs on roughly $608 billion worth of additional imports. Here’s a breakdown of all the tariffs so far, including retaliations by trading partners, which we compiled with help from the Peterson Institute for International Economics:
Several nations have met Trump tariff-for-tariff, leaving the situation a standoff with no obvious resolution. Most haven’t yet matched Trump’s threats of additional tariffs, though trade experts say they most likely would if Trump pulled the trigger.
Markets have been surprisingly sanguine about all this protectionism, so far, with the S&P 500 stock index up about 6% for the year. The Trump tax cuts may have cushioned the market against trade wars, since they’ve boosted corporate profits and provided a tailwind to counter the headwind of tariffs. And the newly taxed merchandise represents a tiny slice of world GDP, with most of the harm of higher taxes isolated in select pockets of the economy.
But markets may waver if Trump pushes further, which he seems inclined to do. Tariffs raise prices, which either comes out of business profit margins or consumer pockets, leaving less money for other things. Raising prices dampens demand, so producers sell less. And losers typically outnumber winners in trade wars, since tariffs reduce efficiency and make everybody worse off, on average.
Trump doesn’t care. He seems eager to find the pain points of trade partners, and China in particular. So far, his tariffs target about one-tenth of all Chinese imports to the United States. But he has started the process for putting tariffs on nearly all Chinese imports, perhaps because he thinks China will blink somewhere along the way, and grant the concessions he wants, including a narrower overall U.S. trade deficit with China.
But China might not blink, especially with the U.S. midterm elections coming in November. To some extent, those elections will be a referendum on Trump’s trade policies, and if Republicans lose control of one or both houses of Congress, Trump’s hand will weaken, while China’s will get stronger. So China may stall, while Trump tries to punch harder. There are probably plenty of updates coming to the Trump trade war scorecard.
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Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman