Trump’s China Tariffs Are Delivering on One Front, Study Finds
Date: Wednesday, February 6, 2019
Source: Sourcing Journal
President Donald Trump’s tariffs on imports from China continue to attract opposition from economists and much of the business community. They also may be delivering on at least one goal of the administration’s trade wars: reducing imports of targeted products from China.
In a new study, economists at the Institute of International Finance found 25 percent tariffs imposed last summer on a $50 billion list of more than 1,000 products ranging from electric cars to industrial seals and medical imaging machines reduced both the value and volume of those products imported from China.
They also found that 10 percent tariffs on a further $200 billion in imports that took effect in late September had less of an impact and had led to a well-documented pre-tariff surge in imports as companies sought to get ahead of the tariffs.
The IIF study released Tuesday affirms one of economics’ founding truths — raise a price on a product and demand for that product tends to fall.
It points to how businesses are adapting to Trump’s tariffs. “U.S. importers are using fewer Chinese goods, while Chinese exporters are partially lowering prices to offset tariffs,’’ wrote IIF researchers Sergi Lanau, Gene Ma and Greg Basile.
But it also illustrates how tariffs may do little to fulfill another of Trump’s stated goals: reducing the U.S. trade deficit.
The impact on total U.S. imports from China in 2018 was “muted,” the researchers wrote, largely because of the rush to get ahead of tariffs that it caused on the larger $200 billion list. Trump initially threatened to raise those tariffs to 25 percent on Jan. 1 but has delayed that to March 1 as he has sought to negotiate a deal with Xi Jinping, his Chinese counterpart.
“Moreover, strong U.S. growth in 2018 lifted imports from all countries, offsetting the impact of tariffs on the wider U.S. trade deficit,” the IIF economists added.
The IIF study also found that the tariffs had done little to reduce the U.S.’s bilateral deficit with China, amid retaliatory duties from Beijing and “a large reduction in China’s imports from the U.S.’’
That impact of the retaliatory tariffs on U.S. exports, the IIF researchers said, would be the focus of one of their next studies.