Tags
Benjamin Della Rocca, Benn Steil, China, Council on Foreign Relations, goods imports, imports, merchandise imports, n, Peter Navarro, tariffs, Trade, tradewar, Trump, Washington Post, {What's Left of) Our Economy
Only in the free trade-worshiping American Mainstream Media could an op-ed piece titled “Debunking Trump’s Tariff Claims” be published that’s chock full of easily debunk-able claims itself.
The first such allegation in the article, which came out on the Washington Post’s website yesterday, holds that the administration’s view that China “bears most of the burden of the tariffs” imposed by the President over the last year is based solely on adviser Peter Navarro’s explanation that China is lowering the prices of its goods in order to offset them. Authors Benn Steil and Benjamin Della Rocca of the Council on Foreign Relations note, correctly, that U.S. government data show that prices of Chinese imports haven’t fallen by nearly as much as they’ve been increased by Trump tariffs.
What Steil and Della Rocca have left out, though, could fill a book. For instance, the tariffs still only cover $250 billion worth of America’s total goods purchases of China – which last year totaled just under $540 billion. So that’s well under half. In addition, the vast majority of these levies have been in place for considerably less than a year.
Moreover, the prices of imports from China – which stem from numerous influences aside from tariffs (U.S. and other foreign market conditions for the various products involved, levels of Chinese subsidies – including value-added tax rebates that were increased last September) – have definitely shifted gears. During the pre-tariff period May, 2017-May, 2018, they rose 0.40 percent. During the largely post-tariff period May, 2018-2019 (encompassing the latest available data), they fell by 1.4 percent.
Equally interesting: Those May China import prices hit their lowest absolute level since September, 2007, nearly 12 years ago. Coincidence? Overall non-fuel import prices are down, too – but stand only at a post-September, 2017 low.
Perhaps more important, though, Navarro has in fact not staked his stance only on import prices. As he told Fox Business on June 21 (before the Steil-Della Rocca article), “China producers pay for these tariffs in the language of economics, they bear the burden of the tariffs through lower prices, lower exports, lower profits.” And there’s abundant evidence to back him up.
Notably, since July, 2018 (when the first, $50 billion, tranche of Trump tariffs were imposed), America’s goods purchases from China fell on a monthly basis by 16.66 percent. The comparable results for the previous year – an increase of 0.92 percent. Over that span, U.S. non-oil goods imports (the best global control group for goods imports from China) weakened, too, but kept growing. The slowdown was from 6.65 percent to 1.82 percent.
Another way to look at these changes is to compare U.S. goods imports from China from January-May of this year with those purchases from the same five-month stretch in years past. During the first such Trump period (covering 2016-2017), before any tariffs were imposed, these merchandise imports from China increased by 8.10 percent. The purchases went up during the following five-month stretch – to 9.54 percent.
The growth rate during the first five-month period featuring tariffs, in 2019? There was no growth. In fact, they sank by 12.34 percent. And interestingly, the overall U.S. economic growth rate during these spans was almost unchanged.
Since the federal government doesn’t keep monthly figures on the gross domestic product (GDP), I’ve used the next best measure — the quarterly data kept by the Bureau of Economic Analysis. On a pre-inflation basis (the same gauge as used by the trade figures), during the first between the first two quarters of 2018, the economy grew by 2.93 percent. During the first two quarters of 2019, the pace quickened only to 2.95 percent. (Because the first results for second quarter GDP aren’t in yet, I’ve used the average of these widely followed “tracking figures” as a substitute.)
An even clearer idea of Chinese losses can be gleaned from considering what U.S. merchandise imports from China might have been without any tariffs. These kinds of exercises are anything but precise, of course. But had they increased at the same 9.54 percent rate as between January-May, 2017 and 2018 rather than shrinking by 12.34 percent, they’d have totaled $224.97 billion during the first five months of this year – a swing of nearly $45 billion.
Steil and Della Rocca didn’t bother to look at the impact on China’s global exports, either – even though it looks sizable. Between July, 2018 and May, 2019 (from that first full month of U.S. tariffs through the latest data month), China’s global overseas merchandise sales fell by 0.80 percent on a monthly basis. From July, 2017 to May, 2018 (pre-any tariffs), they expanded by 8.94 percent.
China’s overall economic growth took a big hit, too. On an annual basis, in the third quarter of 2018, (when those initial American tariffs were slapped on), Chinese GDP expanded by 6.5 percent. (And yes, I realize these numbers can be very dodgy.) By the first quarter of this year, it had dipped to 6.4 percent. From the pre-tariff third quarter of 2017 to the first quarter of 2018, China’s growth rate remained the same – a considerably higher 6.8 percent.
President Trump and his aides certainly can and should be much more precise when they talk about the trade war’s costs. But examining these claims using partial quotes and isolated figures is surely a much greater sin. In other words, the bigger the picture examined, the better the Trump administration’s contention that the Chinese economy is suffering a much greater burden from U.S. tariffs than America’s
RealityChek 