President Donald Trump has launched a campaign to fight a trade imbalance against China because ‘China and other nations trade unfairly with the United States.’ The goal is to use tariffs (or the threat of tariffs since they have not yet occured) to get China to back down on other trade issues.
What does this mean? And, how will Indian Country be impacted?
It’s important to say over and over again that a tariff is fancy word for a tax. A tariff affects how much corporate consumers are charged for, say, steel from China that is used to make a car. And in response to such a tariff — China will levy a similar tax on its consumers when they buy pork, making that meat more expensive in China.
“Under my administration, the theft of American prosperity will end,” the president said. “We’re going to defend our industry and create a level playing field for the American worker — finally.”
Trump tweeted about trading with China:
We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!
— Donald J. Trump (@realDonaldTrump) April 4, 2018
The three issues the Trump White House wants China to address come from a plan called “Made in China 2025.”
First, the administration opposes the idea of a “technology transfer” in the plan that requires U.S. companies to teach Chinese companies how to “extract technologies from other countries” so that the products can be made there. A Chinese version of an iPhone, for example.
Second, the administration says China hurts U.S. products by selling too many, too cheaply. “This excess capacity has led to lower global prices and a glut of supply that undermine the viability of even the most competitive manufacturers, and policies like Made in China 2025 call for this pattern of distortion to continue,” says the Office of U.S. Trade Representative.
And, finally, the U.S. wants less of China’s rigid security protocol.
But in a way, the issues are less relevant than the tactics here. The tactic is for the United States to levy (impose) its tariffs (taxes) on 1,300 Chinese products worth $50 billion. The list includes products from the Chinese aerospace, tech and machinery industries, medical equipment, medicine and bookbinding equipment.
China responded with its own list, also totaling some $50 billion, and that includes pork, soybeans, aluminium scrap, and steel pipes. A statement from the Chinese embassy put it this way: “As the Chinese saying goes, it is only polite to reciprocate.” The U.S. Trade Representative responded that there is no basis for the Chinese tariffs.
Each side will tax products and the result will cost consumers more. And the producers of those products will make less money.
That’s where Indian Country comes in.
The tax bill will be paid every time someone buys a product that’s on the list, such as a car. And, on the other side of the ledger, Native American consumers will benefit as the price of pork (and its competitor, beef and chicken) drop because there will be more supply on the market. But the producers, the farmers, will make less.
According to the National Congress of American Indians: “Agriculture is increasingly important to Native economies, representing the economic backbone of more than 200 tribal communities and witnessing an 88 percent increase in the number of American Indian farmers between 2002 and 2007. According to the Census of Agriculture, in 2007 annual Indian agriculture production exceeded $1.4 billion in raw agriculture products.”
Agriculture represents one risk in a trade war. But there is another side to this story. Many economists are concerned about the imbalance of trade, in other words, United States consumers buy more than the country makes. This is the trade deficit — and the Trump administration’s goal is to shrink it. And there is evidence that this trade deficit impacts wages and job creation, especially in manufacturing jobs.
This is where politics and policy gets messy. Many Republicans on Capitol Hill support free trade and are not inclined to start a trade war with any country, let alone China. On the other hand, some Democrats are eager for a trade policy that protects jobs.
The trade-off is that a protectionist policy will make TVs, cars, and phones, more expensive, while, at the same time creating less demand for international consumers to buy pork, wheat and soybeans from U.S. farmers.
The National Congress of American Indians is the owner of Indian Country Today and manages its business operations. The Indian Country Today editorial team operates independently as a digital journalism enterprise.
Mark Trahant is editor of Indian Country Today. He is a member of the Shoshone-Bannock Tribes. Follow him on Twitter Follow @TrahantReports