○ The U.S.-China confrontation
has turned dramatically—and not to
Trump’s advantage, despite his tweets○ By Peter Coy
President Donald Trump has bragged repeatedly, in tweets
and press conferences, that China is absorbing the cost of
U.S. tariffs on Chinese products. He said it again on Aug. 5,
tweeting that “it is now even more obvious to everyone that
Americans are not paying for the Tariffs—they are being paid
for compliments of China, and the U.S. is taking in tens of
Billions of Dollars!”
Trump happens to be wrong about this, but set that aside
for a moment and focus on his desideratum. He seems to be
saying that he wants Chinese companies to cut the prices
they charge by an amount equal to the tariffs to keep their
customers unaffected. In his beautiful vision, Chinese com-
panies would bear the full cost of the tariffs. Add the federalgovernment’s import tax onto the discounted China price,
and you would get the best of all worlds: more revenue for
the federal government, no harm to the American con-
sumer, and a squeeze on the Chinese competition.
To repeat, this is not what’s happened so far. Economic
analyses have shown that American consumers are bearing
almost all of the cost of the tariffs. That’s because Chinese
exporters haven’t cut prices significantly—their profit mar-
gins were already thin, and they’ve had little or no room
for discounts.
What if China did exactly what Trump wants? Wouldn’t
that make the president happy? Actually, no. Because China
effectively cut prices on Aug. 5 by allowing its currency to
weaken—and Trump is furious. The Treasury Department
even took the extreme measure of officially labeling China
a currency manipulator, echoing the president’s own lan-
guage. While the designation doesn’t have much teeth,
it’s likely to anger the Chinese and make a trade deal even
harder to achieve.
Scarily, the president doesn’t seem to have a clear idea
of how foreign trade works or even what his ultimate objec-
tive is and how to achieve it. He’s dragged the U.S. into a GETTY IMAGES (3)REMARKS
Strong
yuan,
pricey
exports
Weak
yuan,
cheap
exports