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Editor’s Note: Can the U.S. Win the Trade War With China — and at What Cost?

Although the Trump administration has argued that newly imposed tariffs on China are necessary to curb its abuse of global competitors, industry leaders are saying the tariffs are disrupting their supply chains and adding costs that they will need to pass on to consumers.

Q2 2019
Every day news of the U.S. trade war with China takes a new turn. On May 10, the Trump administration raised tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent, after trade talks between the two countries broke down. Then, in mid-May, the Trump administration signed an order that may ban major Chinese companies from buying computer chips from the U.S. China has referred to the administration’s moves as “economic terrorism.” Meanwhile China is raising tariffs on $60 billion of U.S. goods, has halted its purchase of American soybeans, and has also suggested it may curb exports of rare earth minerals, which are crucial to high-tech manufacturing.

What does this mean to U.S. businesses and consumers? An analysis from the Tax Foundation finds that the administration’s 25 percent tariff on $200 billion worth of Chinese goods amounts to a $50 billion tax increase and would reduce GDP by 0.21 percent and eliminate more than 161,751 jobs. This is because the cost of new tariffs is being passed on to U.S. companies, affecting their decisions and ability to grow and increase hiring. And many companies say they’ll have to pass on the extra costs of tariffs to consumers of their products.

Columbia Sportswear CEO Tim Boyle calls the tariffs “very disruptive” to his company’s supply chain and said in a Bloomberg TV interview Columbia will pass on the costs to consumers if it has to. According to Boyle, “The big issue is really the uncertainty we face in trying to grow our business; we’re spending way too much time worrying about Mr. Trump’s trade war as opposed to selling our products.”

Yet, there are those who would say these tariffs are necessary because China has taken advantage of its global competitors by ignoring trade agreements and illegally appropriating foreign technology. Getting China to change will require severe financial penalties, according to Michael Collins, president of MPC Consulting, which focuses on the challenges faced by small and mid-size manufacturers. He believes we need a “short-term sacrifice to avoid long-term collapse” of our economy.

The question remains — can we win this trade war and at what cost?

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