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Policy Summary
Last year at this time, when I first joined U.S. Resist News, many of the political and economic headlines featured two popular terms-’tariffs’ and ‘trade war’.  As Trump tariffs were levied on all matters of imported goods, the negative effects that they were quickly spurring became apparent and the outcry on the part of the  industries rose up. These policies quickly spanned to affect the global economy and U.S. farmers were locked out of international trade markets and manufacturers were rendered unable to import the supplies they needed. Given all this, it stands to reason that most of the nation hoped the trade war would quickly be resolved.

Almost a year later, one of the most important aspects of the trade war  has yet to be resolved-the matter of trade relations between the U.S. and China. While trade talks between Donald Trump and Chinese President Xi Jinping were initially scheduled for some time ago, they were halted when the Trump administration accused China’s negotiators of going back on earlier promises they had made regarding legislative changes to their nation’s trade policy. China, on their part, accused Trump of not being realistic in his demands. Both leaders are scheduled to meet in June 2019 at the G-20 Summit but even if they agree to restart the stalled trade talks it will take even more time to reach any sort of resolution.

Trump recently increased the current tariffs on $200 billion worth of Chinese imported goods and has made clear threats to impose the same on an additional $300 billion dollars worth.  In addition, he went so far as to try and stop American companies from selling components to Huawei, one of China’s most prominent telecommunications corporations. Placing a company like Huawei on a blacklist like this will cause problems for the economies of both U.S and China. The latter was quick to retaliate with some tariff increases of their own on popular American imported goods. In an interview with CNBC, a Chinese Government official stated that China wanted to see the U.S. take action on their part before they would consider resuming trade negotiations.

Analysis
When he addressed the matter of further tariffs being levied against China, Trump insisted that the additional costs would be covered by the Chinese. That seems to be working out about as well as his promise that Mexico would pay for his proposed wall on the American border. According to a recent study by the International Monetary Fund (IMF) based on data from the U.S. Bureau of Labor Statistics, the opposite is true and that tariff costs have been thrust directly onto the shoulders of the U.S. companies who import the most goods from China.

This pattern is not new to U.S. economists. We saw it during the early days of the trade war when U.S. importers were forced to raise the prices of the products they produced. That caused sales to decline and workers to be laid off. The effects were particularly severe for America’s farmers and agriculture workers who were locked out of the global trade markets on which they depend to maintain healthy profits. The way it looks from here, rural America is once again poised to feel the worst of the trade war’s effects. Many manufacturers who employ large numbers of midwestern workers are being forced to close down plants and lay off employees. Two well known examples are General Motors and The Mid Continental Nail Corporation.

The negative effects for these regions likely won’t stop with job losses, though. Midwestern citizens are likely to see the costs of the consumer goods they also depend on go up. Both Walmart and Macy’s, two of the most popular retailers in the midwest have indicated that that they will likely be raising their prices on everyday products if Trump proceeds with the tariffs he has mentioned. These cost hikes, though, will probably not be confined to items like clothing and household supplies. Rural areas are also home to telecom companies that will likely find themselves unable to import the necessary supplies from Chinese providers.  The transmitters and receivers that allow telecom providers to deliver their service to rural areas are primarily manufactured by Huawei. While large carriers such as Verizon and AT&T do not use Huawei equipment, many smaller carriers depend on it. If they are unable to import the products they need, they could be left with infrastructure that is already aging and degrading. Poor weather conditions could compel them to malfunction, causing significant problems for the entire region that could go as far as preventing people from calling 911 in the event of an emergency.

Since the trade war began, Trump has claimed that his administration’s tariff policies are beneficial to the U.S. economy. “Trade wars are easy to win” he proudly tweeted. As previously stated, though, overwhelming evidence points to the contrary. Making it hard for U.S. manufacturers to import the supplies they need and for farmers to sell their crops in international markets is causing significant economic problems. Continuing Trump’s tariff war will only make things worse, particularly for those who were already struggling.

The midwestern farmers who are still suffering from the effects of the trade war were, for the most part, proud members of Trump’s base during his 2016 campaign and they are not alone. Last year saw the Mid Continental Nail Corporation of Poplar Buffs Missouri lay off vast numbers of its workers and Trump’s aluminum and steel tariffs drove their costs through the roof. In Butler County where the factory is located, Trump received 80% of the votes. Perhaps these voters will reconsider who they vote for in 2020.

Resistance Resources:

  • The Peterson Institute for International Economics is a nonpartisan think tank that produces research and analysis on international economic policy related matters.
  • The Rural Wireless Association is a trade association that advocates for wireless carriers in rural areas and works to make sure their voices are heard on Capitol Hill.
  • The Council on Foreign Relations is a nonpartisan think tank and research organization that specializes in matters involving foreign policy and international relations.
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