Analysis: There are three ways the U.S.-China trade war could end. Two would be bad for America.
President Trump speaks during a trade meeting with Chinese Vice Premier Liu He on Aprll 4. By Heather Long Heather Long Economics correspondent Email Bio Follow May 10 at 1:52 PM President Trump is trying to achieve a massive trade deal with China, something no other president has been able to do. It was always going to be tough. A week ago, a deal appeared close. Now prospects seem bleak.
1) Trump gets a “good deal.” It’s subjective what would constitute a good deal, but most economists, trade negotiators and business leaders say it means China would agree to enhanced protections for intellectual property and open up the Chinese market more to U.S. businesses. Ideally, trade experts say there would also be an enforcement mechanism to ensure China follows through on its promises.
Some on Wall Street still think this scenario can happen, which helps explain why the market isn’t down more this week. It would also be a major talking point for Trump’s reelection campaign. But investors, business leaders and the Chinese also want to see the tariffs removed after a deal is reached. If the tariffs remain, it could still be a drag on the economy in the critical 2020 election year.
The Tax Foundation, which typically leans to the right, said Friday that the tariffs already in place amount to $72 billion worth of new taxes on Americans. If Trump puts even more tariffs, as he has threatened, growth would fall by 0.75 percent, “effectively offsetting almost one-half of the long-run impact of the Tax Cuts and Jobs Act,” and employment would fall by more than 580,000 jobs, the Tax Foundation forecasts.
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