Donald Trump famously contends that trade wars are easy to win. But they’re certainly not easy to start.
On Monday (June 18), Trump told the US trade office to find $200 billion worth of Chinese goods to impose tariffs on, in the event that China retaliates against his latest round of tariffs.
Arithmetically speaking, that sounds doable. After all, the US imported $506 billion worth of Chinese products in 2017.
But there’s a catch. In order to find $200 billion worth of Chinese products to apply duties to, the US risks eating into American consumers’ spending power, as analysis by Panjiva, a research firm, demonstrates. That’s because the US is astonishingly reliant upon Chinese goods.
The White House wants to impose duties only on goods that won’t hit American households, as officials flagged in their last trade action. That’s a tough balance to strike because tariffs are essentially taxes, ones that are usually paid by consumers. Now, higher price tags aren’t always bad for the US economy as a whole; increased prices can translate into more profits for domestic companies, raises for US workers, and more government revenue. But if sticker prices rise sharply, Trump could face voter backlash in the November midterm elections, loosening his party’s stranglehold on Congress.
One way of preventing that is to put tariffs on goods that can be bought from somewhere besides China. As it happens, sources in the administration say that the next round of tariffs will target products for which China supplied 33% or less of total imports, reports Reuters.
There’s just one problem: China dominates the share of a lot of US imports. For instance, nearly all US laptop imports and nine-tenths of foreign-made toys come from China. Only about $66 billion of US imports from China meet that one-third threshold, according to Panjiva. (The research firm’s calculations also omit goods like washing machines and steel that already face tariffs or that have been ruled out by lobbying efforts, which adds up to about $80 billion.)
If the administration wants to levy tariffs on $100 billion worth of Chinese goods, as Trump originally pledged, it will have to include products for which China supplied 44% (or less) of US total imports, according to Panjiva. A similar analysis by Reuters put the threshold slightly lower, at 40%.
Finding $200 billion worth of Chinese goods to slap tariffs on will force the White House to up that threshold to 65%. That will mean including tariffs on phone network equipment—things like telephone sets and modems, says Panjiva. Last year, the US imported around $23 billion worth of Chinese goods in that category.
Of course, to avoid stoking voter ire, Trump’s team also should aim to exclude anything sold directly to consumers, and instead focus on products bought by businesses—which may nonetheless pass on costs to consumers.
Even at the 33% threshold, coming up with the new list of products targeted for tariffs is going to be tough. Of the top 25 items that might be considered, 12 are consumer goods, including $5 billion worth of Chinese-made PCs and $2 billion of cotton sweaters and outerwear.
That does leave $5 billion in car parts and nearly $1 billion in truck tires from China available for inclusion in Trump’s retaliation list. But if he needs those big numbers to add clout to his threatened auto imports tariffs, the president is going to have to find something else to tax instead.