President Donald Trump’s trade war with China is producing no meaningful results, increasingly damaging America’s economy, and further isolating the U.S. on the world stage, according to a Monday Wall Street Journal op-ed.
Jason Furman, a professor of practice at the Harvard Kennedy School, wrote that “the U.S. must change its approach, enlisting allies and international institutions to advance a more focused set of demands” if the country has any hope of ending China’s unfair economic practices.
Instead, Trump’s tariff scheme has “caused clear harm to the U.S. economy in the short run,” contributing to declines in business investment and sucking up potential growth in gross domestic product.
Furman noted that the president’s strategy could be successful in theory — “When workers go on strike, they do so knowing they will lose wages in the short run, but they expect to recoup those losses through larger long-run wage increases,” he wrote — but markets have made clear that investors do not expect any future concessions from China to make up for the short-run losses.
Adding to the equation are currency changes, with the yuan weakening and thereby reducing the effect of tariffs by making exports cheaper.
“This is the inevitable result of Mr. Trump’s de facto strong-dollar policy, driven by larger budget deficits that have increased foreign demand for U.S. dollars as well as tariffs on China that have reduced U.S. demand for the yuan,” Furman wrote. “Before the latest round of the tariff war, China was helping bring about Mr. Trump’s desired weak dollar by intervening in currency markets to keep the yuan strong. Yet when Beijing gave markets more latitude, the administration branded China a currency manipulator.”
That China is not eager to cave to Trump’s demands is no surprise, Furman said, because as the country reduces imports from the U.S. it only increases imports from other countries — and China is increasing exports to other countries as well.
The Trump administration must make a radical shift in its trade policy toward China if it wants to see the trade war end and America come out on top, he wrote.