Donald Trump has again defended tariffs as his dogged, often self-contradictory pursuit of a trade war with China put allies and opponents alike in a difficult spot.
Stocks tumbled after China said it would impose higher tariffs on US goods including frozen vegetables and liquefied natural gas, in retaliation for America raising tariffs on $200bn in Chinese imports. Trump has threatened to extend tariffs to the remaining $300bn or so in Chinese imports that have not been targeted yet, but told reporters on Monday: “I have not made that decision yet.”
As the clash of the world’s two biggest economies raised fears of global shockwaves, Trump denied American consumers would pay the price.
“There is no reason for the US consumer to pay the tariffs, which take effect on China today,” Trump tweeted, before offering a convoluted explanation.
That put him at odds with his own national economic adviser, Larry Kudlow, who was asked on Fox News Sunday: “It’s US businesses and US consumers who pay, correct?”
Kudlow replied: “Yes, I don’t disagree with that.”
He also acknowledged that “both sides will suffer”.
Not for the first time, Trump is scrambling political allegiances. It is especially awkward for Republicans. The president’s protectionist “America first” agenda flies in the face of the party’s free market principles and threatens to hurt voters in red states.
Farmers are one example. At a news conference organised by the campaign group Tariffs Hurt the Heartland, in response to the raising of tariffs to 25%, Brent Bible, a soybean and corn farmer in Lafayette, Indiana, said: “Our competitive advantage has always been we are a reliable source of product. This has taken that away.
“It has made it … so uncompetitive that other countries are willing to now take the risk that some of the South American countries have in terms of logistics, safety and being reliable. China and others are now willing to take that risk since we are priced so far out of the market.”
Trump has promised to “make it up” to farmers hurt by Chinese tariffs against soybeans and other agricultural products. Previously set at $12bn, on Monday he suggested the compensation could go even higher.
He said: “We’re going to take the highest year, the biggest purchase that China has ever made with from our farmers, which is about $15bn, and do something reciprocal to our farmers so our farmers can do well.”
US President Donald Trump Trump has often repeated that China pays for US tariffs on its goods. 'We have billions of dollars coming into our treasury from China. We never had 10 cents coming into our treasury; now we have billions coming in' he said on 24 January 2019. On 5 May he tweeted: 'For 10 months, China has been paying Tariffs to the USA.'
But that is not how tariffs work.
China's government and companies in China do not pay tariffs directly. Tariffs are a tax on imports. They are paid by US-registered firms to US customs for the goods they import into the United States. Importers often pass the costs of tariffs on to customers - manufacturers and consumers in the United States - by raising their prices.
Chinese suppliers do shoulder some of the cost of US tariffs in indirect ways. Exporters sometimes, for instance, are forced to offer US importers a discount to help defray the costs of higher US duties. Chinese companies might also lose business if US importers find another tariff-free source of the same goods outside China.
White House economic adviser Larry Kudlow has acknowledged that 'both sides will suffer on this' contradicting the president.
The bailout programme, which has been slow to take effect because of bureaucratic hurdles, threatens to wipe out whatever financial rewards Trump claims tariffs have reaped. “We’re taking in billions of dollars of tariffs,” he insisted at the White House, dangling the prospect of yet more.
But Republicans have become accustomed to twisting themselves into unexpected positions to support Trump on all kids of issues. This is no different.
Last week the White House issued a list of those who back Trump for taking a hard line after China allegedly reneged on commitments made during months of talks. It included Senator Marco Rubio of Florida: “Not surprised #China is trying to go back on changes they had previously agreed to. For years they have had counterparts so desperate for a deal they allowed them to get away with this. [Trump] is the first to ever pose a credible threat to walk away from a bad deal.”
Senator Lindsey Graham of South Carolina said: “I completely support President [Trump]’s approach in trade negotiations with China. This is the last, best chance for America and the world to get China to play by the rules.”
Intriguingly, the roll call also quoted Chuck Schumer, the Democratic minority leader in the Senate: “Hang tough on China, President [Trump]. Don’t back down. Strength is the only way to win with China.”
Senator Sherrod Brown of Ohio, another Democrat, said: “China’s cheating has hurt American workers for far too long. Tariffs brought China to the negotiating table and now that we’re there, the president must secure real changes to level the playing field.”
The remarks illustrate the dilemma facing Democrats. Former vice-president Joe Biden, the frontrunner for 2020, was recently condemned for remarks that played down Chinese competition. “China is going to eat our lunch?” he said. “Come on, man.”
Bernie Sanders has pledged to label China a currency manipulator, a stand Trump vowed he would make but was talked out of by advisers. Sanders and another progressive candidate, Elizabeth Warren, share Trump’s distaste for Republican worship of the free market.
But centrist Democrats are going on the offensive. Another 2020 contender, the Massachusetts congressman Seth Moulton, told Fox News Sunday:“Wielding tariffs like a cudgel because it makes the president look tough? That only hurts American families.”
Many feel Trump has hit upon an important theme – the threat posed by China and its long history of flouting rules.
A few Republican voices have warned against a prolonged dispute. Senator Rand Paul of Kentucky told ABC’s This Week he advised the president to finalise a deal with China soon, “because the longer we’re involved in a tariff battle or a trade war, the better chance there is that we could actually enter into a recession because of it”.
Trump said on Monday he plans a meeting with the Chinese president, Xi Jinping, next month at the G20 summit in Japan. He insisted: “We’re in a great position right now, no matter what we do. I think China wants to have it.”
The Associated Press contributed reporting
