Our President, Mr. Donald Trump, has made some questionable decisions in relation to economics and the recent trade war with China. So what is this trade war? The US-China trade war started on June 6, 2018 when Trump placed his first round of tariffs specifically on China. This placed a 25% tariff on $34 billion worth of Chinese goods. China retaliated by placing tariffs of equal measure. There were many rounds of tariffs to come, and today, there’s American tariffs on $550 billion of Chinese goods and Chinese tariffs on $185 billion of American goods.

Trump argues that a trade war is necessary to end the trade deficit with China, which he claims is key to preserving the economy and the jobs of the American people. There’s two problems with this statement. The first is that protectionist policies aren’t great for solving trade deficits. (5) It leads to other countries slapping on tariffs in retaliation, which means that American exports also fall. Additionally, tariffs drive up the value of the dollar because there’s a smaller demand for other currencies, which results in an increase in imports, and a decline in exports. That keeps the deficit mostly the same. And it checks out. Since the start of the trade war, the trade deficit has only decreased by 4%. (3) The second problem is that trade deficits aren’t necessarily bad. There’s been no correlation (4) between unemployment and the trade deficit. In fact, a larger deficit is indicative of a strong economy, since there’s more money for people to spend on foreign goods.

Instead of benefiting the US, the trade war has made the economy worse. (1) Due to increased prices, consumers spend less, which takes a toll on the economy. The tariffs are costing households (2) more than $1,200 a year. Also, a decline in exports causes American businesses to struggle. This is especially true for farmers because of the Chinese tariffs on agricultural goods. They’ve seen their profits plummet and there has been a skyrocketing number of bankruptcies. With all of these factors added up, the trade war has cost the American economy 0.6% of its GDP, a massive amount. Goldman Sachs (6) even warns that the trade war could lead the American economy into recession.

This trade war really doesn’t make any sense. Simple economics explains why. Now that talks are starting again, let’s all hope that Trump can come to his senses and end this terrible trade war.

Works Cited

1) Amadeo, Kimberly. “Trade Wars and their Effect on the Economy and You”. August 13, 2019
Amiti, Mary. “THE IMPACT OF THE 2018 TRADE WAR ON U.S. PRICES AND WELFARE”. March, 2019. 

2) Lee, Yen Nee. “These 4 charts show how US-China trade has changed during the tariff dispute”. SEP 16 2019

3) Scissors, Derek. “The trade deficit does not cost us jobs”. March 16, 2015

4) Steil, Benn. “Column: Trump’s trade policy is a recipe for recession, history says”. Oct 14, 2016 2:46 PM EST

5) White, Marsha. “Trump's trade war could spark a recession, Goldman Sachs warns”. Aug. 12, 2019, 10:56 AM PDT

6)Wong, Dorcas. “The US-China Trade War: A Timeline”. November 11, 2019