Harvard economist Martin Feldstein says that President Donald Trump’s economic tariffs on China are essentially a necessary evil imposed on American consumers in an attempt to halt Beijing from stealing U.S. firms’ technology
“I oppose tariffs in general. I, too, prefer an environment in which governments do not interfere with imports and exports, and in which U.S. firms can operate freely in foreign countries,” Feldstein wrote for Project Syndicate.
The Trump administration has slapped tariffs on $200 billion worth of Chinese goods last month and is threatening to impose duties on virtually all of the goods China exports to the United States, Reuters reported.
“Trump and other U.S. officials think a tariff war with China can be won because China exports about four times more to the US than the US exports to China," he wrote. "The U.S. can therefore impose a much larger burden on Chinese exporters than the Chinese can impose on U.S. exporters. The Chinese economy is also much more dependent on exports than the U.S. economy is.”
Trump has said signs of economic weakness in China and its slumping stock markets are proof of the effect U.S. tariffs are having on the Chinese economy. Still, Beijing has remained defiant, vowing to stimulate domestic demand to cushion the blow from any trade shocks.
“The tariffs are indeed a tax on American consumers and firms that use Chinese products in their production processes. But the increase in prices that Americans pay for Chinese imports and the resulting loss of real income are very small,” Feldstein wrote.
“Annual imports from China total about $500 billion. If the U.S. imposes a 25% across-the-board tariff, the rise in the cost to American buyers – assuming no change in the prices charged by Chinese exporters – would be $125 billion. With U.S. national income exceeding $20 trillion, the increased cost would be a little more than 0.5% of total U.S. spending,” Feldstein wrote.
“And, because Chinese exporters would probably reduce the prices of some of their products, the increased cost to American buyers would be less than $125 billion. Moreover, American buyers would shift some of their purchases to products produced by U.S. firms or to imports from other countries, further lowering the net cost.”
Feldstein is in good company with his disdain for the tariffs.
Forbes magazine owner Steve Forbes warns that trade tariffs are really just sales taxes in disguise and both consumers and business will be better off once they are removed.
“Tariff is another word for sales tax,” Forbes told "The Cats Roundtable" on 970 AM-N.Y.
"The quicker we get rid of these (tariffs), the better off consumers will be, the better off businesses will be," Forbes told host John Catsimatidis. "When you hear 25 percent tariff on autos, that’s the equivalent to a 25 percent sales tax on automobiles," the chairman and editor-in-chief of Forbes Media explained.
Forbes also wasn't hopeful of a trade deal with China being reached, indicating that there's still much to do."We're not going to get an agreement before November," he said. "That's going to be a tougher one," while trade pacts with other global rivals will more easily be forged, he said.
He said while "very serious trade abuses that have been committed," he thinks there is a better way to bring the guilty parties to justice.
He suggested the U.S. "take more of a laser-like approach, focus on specific individual companies, specific industries, specific individuals in China and we put sanctions on them for violating agreements, for doing things they shouldn’t be doing."
Forbes said such a precision strike "should get immediate attention from Beijing and perhaps we can then wrap something up with them in the next few months."
The "key thing is stopping abuses. Trade done right is a good thing, we all benefit from it," said Forbes, a Republican candidate in the 1996 and 2000 presidential primaries.
"When we remove barriers, America does very well, we’re very competitive," he said.
For his part, Trump on Monday said it was “too soon” for Washington to talk to Beijing about working out a deal on trade, suggesting U.S. tariffs have yet to exert enough pressure to force Beijing into making concessions at the negotiating table, Reuters reported.
“China wants to talk, very badly, and I said, ‘Frankly, it’s too early to talk.’ Can’t talk now, because they’re not ready,” Trump said during remarks on trade at the White House. “If, politically, people force it too quickly, you’re not going to make the right deal for our workers and for our country.”
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