Since we wrote several articles on the steel tariffs, we have to update when they are essentially canceled with our favorite trade partners. We had argued that they did not really punish China, which we now understand was the main purpose, to match Trump’s campaign rhetoric. Trump was embarrassed for a couple of days, while continuing his claim that we have a trade deficit with Canada, when we have a surplus.
Instead, Trump now is instituting $60 billion worth of tariffs, directly on China. This has sent the DOW down 2.93%, and S&P 500 down 2.52% today.
On Steel, the exempted countries, and their 2017 import contributions in value and percent, are: the EU ($9.18 billion, 31.5%), South Korea ($2.79 billion, 9.6%), Brazil ($2.44 billion, 8.4%), Canada ($5.12 billion, 17.6%), and Mexico ($2.50 billion, 8.6%). These add up to 75.7%, and $22.0 billion. China’s share is only ($0.98 billion, 3.4%).
The principal country importers in the 24.3% left out of the forgiven list are: Russia ($1.43 billion, 4.9%), Turkey ($1.18 billion, 4.1%), Japan ($1.66 billion, 5.7%), and Taiwan ($1.26 billion, 4.3%). The sum of these is 19.0% and $5.53 billion. Why our allies Taiwan and Japan? Why Russia, which Trump refuses to punish in any other way?
Trump claimed that the steel and aluminum tariffs were for National Security. Remember, you can’ t have a nation if you don’t make your own steel? Yet the full tariff would only have raised our own steel production from 73% to 80%. Also, our steel suppliers are our friends and allies, not our enemies (except for Russia’s 5%). But trade with Russia is more of an influence than a tariff is.
Paul Krugman, economist for the NY Times, on his Twitter account point out that China’s trade surplus as a percentage of its GDP is now only about 2%. This is down from its peak of 9% in 2007. Krugman also argues that is is partly Korean and Japanese goods being finally assembled in China. So China’s contribution is only half as much as shown.
The largest Chinese imports in value are Computers and Electronics of around $170 billion, of which China has 46% of US imports. Next is electrical equipment at about $40 billion, of which China has 38%. Of course, the $60 billion of tariffs against China will either be replaced by other countries, or else consumers will have to pick up the price rises.
Our exports to China are led by Transportation Equipment of which China buys 23% of our exports. Agriculture is next, of which China has 12% of our exports. Next comes oil and gas, of China has 5%.
This shows that Peter Navarro, formerly of UCI’s Paul Merage School of Business, is now getting his way in a trade war with China.