The United States and China are not in an all-out trade war, but they’re getting closer to it. That’s why the stock market tumbled Wednesday morning and soybean farmers are panicking.

On a grand scale, the latest development is unlikely to send the U.S. economy into a recession. Growth is strong, and China has only threatened $50 billion tariffs on U.S. goods. Such tariffs haven’t taken effect, but even if they do, they would be minuscule in relation to the United States’ $18 trillion economy — 0.3 percent, to be exact.

But that doesn’t mean there wouldn’t be pain.

Certain parts of the United States — especially Illinois, Indiana, Iowa, Kansas, Minnesota and Washington — would feel it acutely. And more Americans would get hurt the further the brinkmanship goes, especially if the stock market sell-off ends one of the longest bull markets in U.S. history.

Here’s a quick recap of what happened in the past 24 hours: On Tuesday evening, the United States announced its intent to put 25 percent tariffs on 1,300 Chinese imports. The tariffs wouldn’t take effect until late May at the earliest, but the message to China was clear: President Trump wants China to buy more U.S. stuff and do a better job of protecting U.S. intellectual property.

China, normally known for “measured” responses in its trade dealings, fired back Wednesday with a gut punch to Trump, saying it intends to put 25 percent tariffs on the top goods the United States exports to China: airplanes, soybeans and cars. The United States’ tariff list was full of a lot of products, mostly parts of machines, that are traded on a smaller scale. But China is taking aim at key U.S. industries, and two of them — soybeans and cars — are concentrated in states Trump won.

[ China fires back at Trump with the threat of tariffs on 106 U.S. products ]

The tariffs have yet to take effect on either side, so there’s plenty of time for the two governments to negotiate — and Wall Street, soybean farmers and many executives are really hoping they will.

“China’s rapid and aggressive response to the proposed U.S. tariffs has raised the stakes for both sides. But its move to publish a list of counter-tariffs is primarily intended as a deterrent, and we think there is still time to de-escalate trade tensions before the tariffs come into force,” said Julian Evans-Pritchard, a senior China economist at Capital Economics.

The White House was sending mixed messages Wednesday morning.

“Even shooting wars end in negotiations,” Commerce Secretary Wilbur Ross said on CNBC just before the markets tanked. He went on to say that he was “a little surprised that Wall Street is surprised by [Chinese retaliation]. This has been telegraphed for weeks.”

Trump followed with a tweet saying “you can’t lose” in a struggle like this with China, escalating fears that this is only the beginning.

But Larry Kudlow, Trump’s new top economic adviser, who has long been a champion of free trade, told reporters outside the White House that Trump “wants to solve this with the least amount of pain. … I can’t emphasize that enough.” Kudlow’s words were far more soothing, but they seemed to contradict Trump, and the president will have the final say.

Trump is making a big gamble here. His move, whatever reaction it draws, is aimed at a more favorable long-term reaction from China. But how much is he willing to sacrifice? And how long is he willing to go?

There’s broad agreement around the world that China hasn’t been playing fair on trade. Businesses are especially upset about how China has restricted the growth of U.S. companies in China. The Chinese government wants to build up domestic industries, especially in tech and high-end manufacturing, but they are doing it partly by taking some U.S. know-how and forbidding U.S. companies from getting much of a foothold in the Chinese market. Many Democrats and Republicans agree that Presidents Barack Obama and George W. Bush didn’t go hard enough on China, and they think Trump is right to press China harder.

But while there’s significant support for Trump going after China, there’s also significant concern about his methods. Trump has dismissed the usual path of taking China to court at the World Trade Organization or trying to get a bunch of U.S. allies to make a coordinated move. Instead, he’s going it alone.

“If protecting U.S. intellectual property is the ultimate goal here, I’m not sure how destroying shareholder wealth, damaging CEO confidence and making the American farmer the main sacrificial lamb here after six years of pain on the farm is going to get us there,” said Peter Boockvar, chief investment officer of the Bleakley Advisory Group.

Here’s where the pain is likely to hit hardest: The immediate risk is to the parts of the United States that produce the goods China plans to hit with tariffs. China accounts for 60 percent of U.S. soybean exports, according to Goldman Sachs. That means a major buyer of U.S. soybeans would basically disappear if the tariffs take effect. American soybean farmers are mainly located in 10 Midwestern states (Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio and South Dakota). Trump won eight of those 10 states in the 2016 election.

But the Chinese would feel pain from this move, as well. Although Brazil and Argentina also send a lot of soybeans to China, the Chinese demand could not be fulfilled by those South American countries alone. It would take time for more fields to be planted in other parts of the world. That means soybean prices would rise in China.

“China would ultimately be the one paying for these soybean tariffs,” Damien Courvalin of Goldman Sachs wrote in a research note Wednesday.

It’s a bit more complicated in the airplane sector, where there are only two major players: American company Boeing and French company Airbus. It’s obvious where China will turn now. The two companies are fierce rivals that have been competing heavily for contracts with China as the world’s second-largest economy beefs up its commercial airline fleet. Boeing stock tumbled more than 2 percent Wednesday and is down about 9 percent in the past month as trade fears rose on Wall Street. It’s unclear whether Airbus could meet all of China’s needs, at least in the short term.

Snohomish County in Washington state has the highest concentration of U.S. workers making airplanes and airplane parts, according to the Labor Department. The state didn’t go for Trump, but it’s far from the only place that would feel the Chinese tariff pain on Boeing planes. Factories nationwide produce parts for the aerospace industry. After Washington, the next biggest areas with the highest concentration of employment in aerospace are located in California (a blue state), Kansas (a red state), Texas (a red state) and Connecticut (a blue state). Parts of Alabama, Florida, Indiana, Massachusetts, Ohio and Pennsylvania also have significant exposure, a reminder of the wide supply chains for cars and planes.

Then there’s the larger risk to the economy if the stock market continues to nose-dive: At the moment, the stock market is down more than 10 percent from record-high levels in January. This is a situation known as a “correction.” It’s not fun, but it’s fairly normal and doesn’t mean the bull market that has been going since March 2009 is in jeopardy.

But if stocks fall more — 20 percent or more — then the market will experience what is known as a “bear market.” That’s usually a lot harder to recover from. It often causes investors, and usually the broader American public, to lose some confidence in the economy. People often start to spend less when they see the market down so much, out of fear that things are getting a lot worse, a scenario known as the “wealth effect.” If people feel poorer when they look at their investments and retirement accounts, they often close their wallets.

“There’s a growing possibility we’ll end up in a trade war, and that is a risk to the brisk growth we were expecting this year and next,” said Karen Dynan, a Harvard economics professor and former Obama staff member.

Then there’s the potential panic in corporate board rooms. If a true trade war breaks out, executives at top companies are likely to stop some spending on new factories out of fear of what’s going to happen next. That starts to erase the good that was supposed to come from the tax bill. The large corporate tax cut from 35 percent to 21 percent was supposed to encourage businesses to hire more people and invest more in new products and factories, but all the uncertainty from trade could curb a lot of that spending. The decline in markets also makes it harder for companies to get money to expand operations.

“There’s a risk of destabilizing financial markets. … If the market reacts strongly and negatively to protectionism, then we could see a real decline in asset values and a pullback in lending that would be really bad for the economy,” Dynan said.

Right now, these are mostly fears about what could happen. But the Chinese are not backing down easily against Trump, as the South Koreans did. Trump says a trade war would be “easy to win.” But he didn’t promise it would be without casualties.

Andrew Van Dam contributed to this analysis.

Read more:

How trade wars end — and why Trump’s will be different

Trump voters get hurt the most in a U.S.-China trade war

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