Trade wars are inherently wars of attrition. You tax your own companies to create incentives for them not to import so much. You are also creating incentives for the exporting country to drop their prices, which may hurt their economy. In other words: You create a certain amount of pain to cause an eventual shift in the balance of trade that will be beneficial — you hope!
But when it comes to “winning,” President Trump is an impatient man. Rather than insist his trade war with China will eventually work out for the best, he insists it is already coming up roses.
As Trump has ratcheted up the trade war in recent days, he has sent a multitude of tweets defending it. Most of them contain falsehoods or carefully worded claims that seem geared toward leaving people with a false impression.
Witness his Tuesday morning tweets.
“In one year Tariffs have rebuilt our Steel Industry — it is booming!” Trump said in his first tweet.
The tariffs have certainly benefited the steel industry at least somewhat, creating or saving as many as 12,700 jobs, according to the Alliance for American Manufacturing (which supports the tariffs). But one estimate puts the cost of those jobs at $900,000 a piece, given the tariffs. As the New York Times reported this year, the number of jobs in the steel industry is still below where it was just four years ago, and investors have taken a dim view of the industry.
“Booming” is certainly a subjective claim, but the numbers and indicators do not seem to back it up.
Trump continued: “We are now a much bigger economy than China, and have substantially increased in size since the great 2016 Election.”
The clear suggestion is that these tariffs have created a shift in the relative strength and sizes of the two country’s economies. When Trump says, “We are now a much bigger economy than China,” he makes it sound like that is a new development.
But the U.S. economy has been much bigger than China’s for a very, very long time. In fact, despite some slowing in China’s GDP growth rate, it is still growing about twice as fast as the U.S. economy — and closing the overall gap.
Later, Trump tweeted, “This money will come from the massive Tariffs being paid to the United States for allowing China, and others, to do business with us,” Trump said.
Trump has repeatedly suggested that China is paying the tariffs, even though that is simply not true. His own chief economic adviser, Larry Kudlow, admitted as much this weekend. China may suffer in other ways, but not by directly paying the tariffs.
Here, Trump does not repeat the claim, but he sure seems to suggest it. When he cites “the massive Tariffs being paid to the United States,” he leaves out the fact that the ones paying those “massive Tariffs” are U.S. companies. If something is “being paid to the United States,” it sure makes it sound like it is coming from outside the United States. He has apparently been chastened by Kudlow’s interview, but only so much.
Then there is this tweet from Monday: “The unexpectedly good first quarter 3.2% GDP was greatly helped by Tariffs from China. Some people just don’t get it!”
Let’s, for a moment, set aside the “Tariffs from China” sleight of hand (which we explained above). Trump says these taxes on U.S. companies are actually helping the U.S. GDP.
Except Kudlow himself acknowledged just the day before that they were not. “We reckon it would be about two-tenths of 1 percent of GDP” lost, he said, referring to the entire U.S. GDP of around $20 trillion. That is $40 billion, which is enough to drop the growth rate by 0.2 percent — or turn a 3.2 percent GDP growth rate into a 3 percent rate. Other estimates have suggested a similar or even bigger drop in the GDP, and the drop could grow with the new tariffs Trump has now tacked on.
(Philip Bump has a rundown of Trump’s previous bogus claims, for those interested in more.)
None of which is to say the trade war might not ultimately turn out. Most estimates suggest China is suffering a heavier toll. That is perhaps to be expected given it sends much more to the United States than vice-versa — and that the initial tariffs focused on elastic industries in which there are alternatives to importing from China.
But that is not really the argument Trump is making. He is suggesting there is not much of a price to be paid by the United States at all, and even that China is basically footing the entire bill. He is claiming much more immediate benefits than the evidence bears out.
And that is not leveling with the people who are on the business end of all this.