The Corner


The Trade War with China Failed

Chad Bown reviews:

US manufacturing exports to China, which had nearly doubled between 2009 and 2017, flattened in the second half of 2018 and fell by 11 percent in 2019 (figure 3). This was partially a result of Chinese retaliation against Trump’s tariffs. But in the first year of the phase one agreement, US manufacturing exports continued to suffer, declining another 5 percent. Overall, they fell 43 percent short of the legal commitment for 2020, remaining more than 14 percent below pre–trade war levels. . . .

The US auto sector provides an excellent illustration of how even temporary trade war tariffs can inflict long-term damage.[3] By 2017, China had become the second largest export market for American vehicles. Then, in July 2018, China retaliated with a 25 percent tariff on US autos. (In a savvy economic maneuver, it simultaneously lowered its auto tariff on imports from the rest of the world.) US exports to China fell  by more than a third (see figure 3). Tesla accelerated construction of a new plant in Shanghai, arguing that Trump’s tariffs on auto parts, China’s retaliation on cars, and the resulting uncertain trade picture, made it no longer competitive to manufacture electric vehicles destined for China in the United States. For similar reasons, BMW shifted some production destined for China out of South Carolina. By the end of 2020, US auto exports had still not recovered.

There’s more, unfortunately.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.


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