China tariffs: U-M experts can discuss
Kyle Handley, assistant professor of business economics and public policy at the Ross School of Business, is an expert on how trade policy, geography and uncertainty affect firms.
“Trump’s escalation of the trade war with China and other allies will continue to weaken U.S. standing abroad and U.S. industries as home,” he said. “Because of strong U.S. economic growth, Trump and his advisers are gambling with house money in a game he will not win. They will soon find out that the U.S. is a small buyer in the world market for Chinese goods.
“The rest of the world will move on without the U.S., as they already have on the Trans Pacific Partnership and other trade agreements. In the meantime, the bill for import tariffs will literally be paid by U.S. consumers and businesses. U.S. export markets will shrink as retaliation by China and other allies continues. Trump would do well to avoid a trade war on Christmas when shoppers realize they can’t afford a new washing machine, their electronic gadgets are little more expensive, and the low price of tofurkey doesn’t make up the difference.”
Alan Deardorff, professor of public policy and economics, is an expert on international trade. He developed the Michigan Model of World Production and Trade, which is used to estimate the effects of trade agreements.
“These added tariffs on imports will hurt China, but they will hurt the U.S. more,” he said. ”
Together with the promised retaliation by China on U.S. exports, the pain will be shared by most producers and all consumers in the U.S. If the intent is to extract concessions from China, there may be a small chance that it will work, but the harm done by the tariffs will far outweigh any benefits from those concessions.”
Mary Gallagher, professor of political science and director of the Lieberthal-Rogel Center for Chinese Studies, is an expert on Chinese politics, law and society.
“The announcement of new tariffs on Chinese goods means that the trade conflict between China and the U.S. will not be resolved anytime soon,” she said. “Trump is doubling down on his threats, fully believing that China cannot levy more tariffs on U.S. goods because the U.S. purchases so much more from China than China does from the U.S.,” she said.
“However, the Trump administration should be more concerned about long-term retaliation on U.S. firms that do benefit from trade with and investment in China, such as Boeing, Apple, GM and other large multinationals. They have much to lose in the trade war as do American agricultural producers.”
Marina Whitman, professor emerita of business administration and public policy, examines questions of international trade and investment. She was chief economist and the first female group vice president at General Motors.
“The U.S. has good reason to object strongly to China’s illegal trade behavior, but the escalating tariff war that President Trump initiated is an ineffective and economically destructive way to go about it,” she said. “On balance, it will reduce rather than create U.S. manufacturing jobs and will raise prices to consumers, especially people who don’t have much money to spend.
“And, rather than putting pressure on China to concede to our demands, this tit-for-tat appears to be stiffening China’s resolve. It’s a real lose-lose situation and is creating uncertainty for businesses that may be more destructive than the tariffs themselves.”