U.S. Trade War with China is Not on Hold

According to White House trade adviser Peter Navarro U.S. Trade War with China is not hold. The Trump Administration announced on Tuesday that it’s moving ahead with 25% tariffs on $50 bn in Chinese imports, and with limits on Chinese investment in US tech industries. The statement came more than a week after Treasury Secretary Steven Mnuchin said that the trade war was being put “on hold.” Treasury Secretary Steven Mnuchin’s characterization of back-and-forth tariff threats between the U.S. and China as a “trade war” was an “unfortunate soundbite,” White House trade adviser Peter Navarro told NPR on Wednesday:

This is a trade dispute that we are having with China. As President Trump said we lost the trade war long ago. President Obama, Bush, Clinton lost this when we got into bad trade deals like NAFTA, which swelled our trade deficit from zero to $70 billion with Mexico. And when China got into the World Trade Organization in 2001, which President Clinton pushed, that’s been just devastating.

We’ve lost over 70,000 factories, 5 million manufacturing jobs. They engage in a whole range of unfair trade practices. They run up a $370 billion trade surplus with us, which costs us over 1 million factory jobs a year. And President Trump basically is going to address that with appropriate measures based on appropriate investigations by people like the United States Trade Representative.

For Michael Cembalest, chairman of market and investment strategy at J.P. Morgan, it’s not easy to gain the upper hand in a trade war, when you’re the country doing all the importing. The point is that the US has a lot to lose if China retaliates against US companies doing business in China. Over the last decade, US companies made large investments in their Chinese subsidiaries. In fact, the bilateral US trade deficit with China almost disappears once you include sales of in-country subsidiaries. In other words, US companies are doing almost the same amount of business in China as Chinese companies are doing in the US, but through their subsidiaries rather than via exports.

The chart on the right shows examples of US corporate sales in China.

Office of Trade and Manufacturing Policy Director Peter Navarro told FOX Business, President Trump is reigniting the trade war opens a new window with China to protect national security. Navarro added the U.S. is prepared for retaliation from China and President Trump has the courage and vision to turn that around.