Economist: Effects of 2018-19 trade war still linger, shows what to expect from another trade war with China

LOGAN – Though many of us might have forgotten about it, the impacts of a trade war with China in 2018 and 2019 still linger in Utah.

In response to tariffs levied by President Trump back then, the country imposed a number of retaliatory tariffs on U.S. agriculture that still remain.

“As an economic tool, tariffs are really blunt instrument,” John Gilbert, a professor of economics at Utah State University’s Huntsman School of Business, said. “They’re not very effective at doing very much except hurting the economies on which they’re imposed and the economies that impose them.”

Gilbert pointed out that during the last trade war, Chinese importers turned to Brazil for much of their soybean imports to avoid the Chinese-imposed agricultural tariffs on U.S. goods. He said it’s hard to get market share like that back once it’s lost.

Gilbert, however, admits it’s possible that President Trump and his administration rather see tariffs as a negotiating tool, that has recently brought Columbia, Mexico, and now Canada to the table.

“That’s certainly a game that can be played,” Gilbert said. “It can be a dangerous game.”

If the U.S. engages in a trade war with China now, or even with Canada and Mexico when a current 30-day pause ends, Gilbert said it will hurt consumers.

“Tariffs are not taxes on foreigners. They’re taxes on American consumers,” Gilbert explained. “Those importers usually have very tight margins, and so they tend to pass those taxes on to the final consumer.”

Gilbert added that China would likely tack on retaliatory tariffs just as they did before.

“I would expect China to retaliate once again by targeting US agricultural commodities,” Gilbert explained. “If they really want to play hardball, China controls most of the world’s supply of rare earth minerals, and basically, your cell phone, your computer, everything that you use. If they decide to restrict the trade, even further in those materials, then they can really hit the U.S. tech industry hard.”

Gilbert admitted that the previous round of tariffs did force increased production of steel in the US, but the increased cost of those materials still remains, impacting many industries that use it.

“You can’t do that in a costless way,” Gilbert said. “If you’re going to increase production of domestic steel, you can do that by putting a tariff on steel, but you’re going to be hurting the construction industry. You’re going to be hurting the consumer durables industry.”