Business Groups Warn of Peril as Trump’s Trade War Spirals

The latest whipsawing escalations in the United States’ trade war with China prompted a wide array of business organizations to warn over the weekend that American consumers and workers would soon be caught in the crossfire.

It is now looking increasingly likely that few large American companies will be able to sidestep the toll exacted by the new tit-for-tat tariffs that China and President Trump rolled out on Friday.

Many business leaders have kept a low profile as the trade war intensified, for fear of attracting President Trump’s ire, and in the hope that the threats of tariffs could be negotiating tactics that will lead to some sort of trade agreement.

But with several tariffs already in place, and President Trump staking out an even more aggressive stance on Friday, many industries are reckoning with just how serious the situation has become.

Joshua Bolten, the president and chief executive of the Business Roundtable, an organization representing the leaders of the largest American companies, said on Sunday that many C.E.O.s were already “poised right on top of the brake.”

“The risk is that everybody’s going to slam on the brake, and that would be a disaster,” Mr. Bolten said on “Face the Nation” on CBS.

President Trump’s latest moves, Mr. Bolten said, could “disrupt trade and commerce in a way that would cause huge damage — not just to the Chinese economy, but to the global economy and the U.S. economy.”

The American manufacturing sector shrank in August for the first time since 2009.
CreditRoss Mantle for The New York Times

The American economy has so far been relatively resilient as the two sides battle. But several recent signs suggest that the tit-for-tat is beginning to broadly hit American businesses.

The American manufacturing sector, for instance, shrank in August for the first time since 2009, according to data released last week from the research group IHS Markit.

“America’s manufacturing workers will bear the brunt of these retaliatory tariffs, which will make it even harder to sell the products they make to customers in China,” the president and chief executive of the National Association of Manufacturers, Jay Timmons, wrote on Twitter on Friday.

While corporate earnings have held strong, several companies said last week that they were trimming their profit expectations as a result of the trade war.

On Friday, after China announced new tariffs and Mr. Trump ordered American companies out of China, the Standard & Poor’s 500 index slid 2.6 percent and the tech-heavy Nasdaq composite fell 3 percent. After the markets closed, the president announced more tariff increases.

China said on Friday morning that it would impose new tariffs on $75 billion of American imports. A few hours later, President Trump announced on Twitter that he would be raising tariffs further on $550 billion of goods coming from China.

The biggest shock was from Mr. Trump’s statement that he was ordering American companies to “immediately start looking for an alternative to China.”

The president said he had the power to do so as a result of a 1977 law that has traditionally been used to deal with security and military threats.

President Trump on Sunday at the G7 summit in Biarritz, France.
CreditErin Schaff/The New York Times

Over the weekend, some of Mr. Trump’s advisers tried to somewhat soften the blow of the president’s words.

Treasury Secretary Steven Mnuchin, speaking on “Fox News Sunday,” said that Mr. Trump had the authority to make such a demand if he declared a national emergency but that he had not yet done so.

“I think what he was saying is he’s ordering companies to start looking because he wants to make sure — to the extent we are in an extended trade war — that companies don’t have these issues and move out of China,” Mr. Mnuchin said. “And we want them to be in places where they are trading partners that respect us and trade with us fairly.”

There is still significant uncertainty on how many of the steps that China and Mr. Trump have announced will come into effect. The president has stepped back or delayed previous tariffs. And on Sunday the president said he was having “second thoughts” about the threats he made last week. But shortly thereafter, the White House press secretary, Stephanie Grisham, said that the president’s regret was that he had not raised tariffs even further.

American businesses have already begun taking steps to respond. The toymaker Hasbro said last month that it was planning to shift a significant portion of its manufacturing from China to other Asian countries by 2020.

The American toy industry is particularly reliant on Chinese factories, which account for 88 percent of its production, according to the National Retail Federation. But the figures are also large for other major portions of the retail industry.

David French, the senior vice president for government relations at the retail federation, said this weekend that companies were facing a difficult road because it could take years to make the kind of moves that the president has demanded.

It’s impossible for businesses to plan for the future in this type of environment,” Mr. French said in a statement. “The administration’s approach clearly isn’t working, and the answer isn’t more taxes on American businesses and consumers. Where does this end?”

Hasbro toys at a Target store in Manhattan. The toy company said last month that it was planning to shift a significant portion of its manufacturing from China to other Asian countries by 2020.
CreditJeenah Moon for The New York Times

President Trump has said that he expects China to pay the costs of the tariffs he has imposed. But the direct costs of the tariffs are generally paid by the companies importing goods from China, who can then pass them along to consumers.

The Consumer Technology Association, which represents the largest electronics companies, has said that the tariffs are already costing the American tech sector $1.3 billion a month, and could raise the price of cellphones by $70 and the price of

The latest whipsawing escalations in the United States’ trade war with China prompted a wide array of business organizations to warn over the weekend that American consumers and workers would soon be caught in the crossfire.

It is now looking increasingly likely that few large American companies will be able to sidestep the toll exacted by the new tit-for-tat tariffs that China and President Trump rolled out on Friday.

Many business leaders have kept a low profile as the trade war intensified, for fear of attracting President Trump’s ire, and in the hope that the threats of tariffs could be negotiating tactics that will lead to some sort of trade agreement.

But with several tariffs already in place, and President Trump staking out an even more aggressive stance on Friday, many industries are reckoning with just how serious the situation has become.

Joshua Bolten, the president and chief executive of the Business Roundtable, an organization representing the leaders of the largest American companies, said on Sunday that many C.E.O.s were already “poised right on top of the brake.”

“The risk is that everybody’s going to slam on the brake, and that would be a disaster,” Mr. Bolten said on “Face the Nation” on CBS.

President Trump’s latest moves, Mr. Bolten said, could “disrupt trade and commerce in a way that would cause huge damage — not just to the Chinese economy, but to the global economy and the U.S. economy.”

The American manufacturing sector shrank in August for the first time since 2009.
CreditRoss Mantle for The New York Times

The American economy has so far been relatively resilient as the two sides battle. But several recent signs suggest that the tit-for-tat is beginning to broadly hit American businesses.

The American manufacturing sector, for instance, shrank in August for the first time since 2009, according to data released last week from the research group IHS Markit.

“America’s manufacturing workers will bear the brunt of these retaliatory tariffs, which will make it even harder to sell the products they make to customers in China,” the president and chief executive of the National Association of Manufacturers, Jay Timmons, wrote on Twitter on Friday.

While corporate earnings have held strong, several companies said last week that they were trimming their profit expectations as a result of the trade war.

On Friday, after China announced new tariffs and Mr. Trump ordered American companies out of China, the Standard & Poor’s 500 index slid 2.6 percent and the tech-heavy Nasdaq composite fell 3 percent. After the markets closed, the president announced more tariff increases.

China said on Friday morning that it would impose new tariffs on $75 billion of American imports. A few hours later, President Trump announced on Twitter that he would be raising tariffs further on $550 billion of goods coming from China.

The biggest shock was from Mr. Trump’s statement that he was ordering American companies to “immediately start looking for an alternative to China.”

The president said he had the power to do so as a result of a 1977 law that has traditionally been used to deal with security and military threats.

President Trump on Sunday at the G7 summit in Biarritz, France.
CreditErin Schaff/The New York Times

Over the weekend, some of Mr. Trump’s advisers tried to somewhat soften the blow of the president’s words.

Treasury Secretary Steven Mnuchin, speaking on “Fox News Sunday,” said that Mr. Trump had the authority to make such a demand if he declared a national emergency but that he had not yet done so.

“I think what he was saying is he’s ordering companies to start looking because he wants to make sure — to the extent we are in an extended trade war — that companies don’t have these issues and move out of China,” Mr. Mnuchin said. “And we want them to be in places where they are trading partners that respect us and trade with us fairly.”

There is still significant uncertainty on how many of the steps that China and Mr. Trump have announced will come into effect. The president has stepped back or delayed previous tariffs. And on Sunday the president said he was having “second thoughts” about the threats he made last week. But shortly thereafter, the White House press secretary, Stephanie Grisham, said that the president’s regret was that he had not raised tariffs even further.

American businesses have already begun taking steps to respond. The toymaker Hasbro said last month that it was planning to shift a significant portion of its manufacturing from China to other Asian countries by 2020.

The American toy industry is particularly reliant on Chinese factories, which account for 88 percent of its production, according to the National Retail Federation. But the figures are also large for other major portions of the retail industry.

David French, the senior vice president for government relations at the retail federation, said this weekend that companies were facing a difficult road because it could take years to make the kind of moves that the president has demanded.

“It’s impossible for businesses to plan for the future in this type of environment,” Mr. French said in a statement. “The administration’s approach clearly isn’t working, and the answer isn’t more taxes on American businesses and consumers. Where does this end?”

Hasbro toys at a Target store in Manhattan. The toy company said last month that it was planning to shift a significant portion of its manufacturing from China to other Asian countries by 2020.
CreditJeenah Moon for The New York Times

President Trump has said that he expects China to pay the costs of the tariffs he has imposed. But the direct costs of the tariffs are generally paid by the companies importing goods from China, who can then pass them along to consumers.

The Consumer Technology Association, which represents the largest electronics companies, has said that the tariffs are already costing the American tech sector $1.3 billion a month, and could raise the price of cellphones by $70 and the price of laptops by $120, on average.

JPMorgan Chase analysts recently predicted that the overall costs to American families of the tariffs were likely to be between $1,000 and $1,500 a year.

“Tariffs are taxes on Americans, putting us on the wrong economic path and compromising our global leadership,” the president and chief executive of the technology association, Gary Shapiro, said on Friday. “How much longer will our families, companies and economy be forced to bear the financial burden of this misguided trade policy?”

China appears to be aiming its tariffs at parts of America where support for President Trump is particularly strong, like farm country in the Midwest. China’s actions on Friday, for instance, add 5 percentage points to the 25 percent tariff already paid on American soybeans.

The president of the American Farm Bureau, Zippy Duvall, said after the latest announcements that “continued retaliation only adds to the difficulties farm and ranch families are facing and takes the situation in the exact wrong direction.”

China also added new tariffs to cars made in America. Tesla, as well as the Germany carmakers Daimler and BMW, are the most vulnerable to the additional levies. Six of the top 10 vehicle models exported from the United States to China, the world’s biggest car market, are from the two German brands, according to the forecaster LMC Automotive.

In private, auto executives say that, for now, the uncertainty is a greater concern than the potential material impact of the tariffs. One auto executive who spoke on the condition of anonymity said the industry was more worried that it cannot predict what might happen next or how bad it might get.

JPMorgan Chase analysts recently predicted that the overall costs to American families of the tariffs were likely to be between $1,000 and $1,500 a year.

“Tariffs are taxes on Americans, putting us on the wrong economic path and compromising our global leadership,” the president and chief executive of the technology association, Gary Shapiro, said on Friday. “How much longer will our families, companies and economy be forced to bear the financial burden of this misguided trade policy?”

“I’m not a climate change guy, but…”: Farmers reckon with new reality in the heartland

Walking over soggy lifeless crops, Brett Adams, a fifth generation Nebraska farmer, paused to catch his breath. Under the dark grey clouds of the Midwestern spring, he was forced to come to terms with an alarming reality: 80% of his farmland was under freezing floodwater.

In March 2019, record-breaking floods inundated America’s breadbasket, a region that’s also a key exporter of corn and soybeans to the world. Much of the Midwest was overwhelmed with floods as a result of torrential rains, frozen ground unable to absorb more water, heavy snowmelt, and a series of extreme weather events that culminated in a major winter storm—described by meteorologists as a “bomb cyclone.”

The U.S. Army Corps of Engineers, the federal agency responsible for the management of the country’s levee systems, say they’ve seen record runoff in the past 15 years. This historic flood has made it clear that unpredictable weather patterns are getting more extreme. After massive flooding in 2011, the Corps had to repair five breaches. So far in 2019, they are dealing with 50.

“Our current goal is to close all the breaches by March of 2020,” said Matthew Krajewski, the Readiness Branch Chief of the Army Corps of Engineers. However, if the Corps were to update the levee to newer engineering standards — to help it withstand the rising flood levels predicted in the coming years — they would need funding approval from the U.S. Congress.

A recent report by the National Oceanic and Atmospheric Administration (NOAA) found that the U.S has seen the wettest 12 months on record, with an average of 38 inches of rain falling from July 2018 to June 2019.

Adams put it in personal terms. “When I was a kid,” he said, “an inch of rain, or an inch and a half of rain, was a big deal. Now it’s like we get four- or five-inch rains all the time, or six-inch rains, even. That was unheard of.”

“I’m not a climate change guy, as far as climate change, global warming, or any of that stuff,” Adams said. “But have I seen the weather change in, say, my 20-year farming career? Absolutely.”

In response to these troubling changes, some farmers in Nebraska are considering new solutions to keep their businesses afloat. One of those farmers, Graham Christensen, travels the country discussing a green farming initiative called regenerative farming.

Tariffs, Mr. Trump’s Miracle Cure

The president appears to view tariffs as the solution to a wide range of foreign policy problems. It isn’t working.

So we’re going to tax Americans until Mexico stops allowing people from Central America to exercise their legal right to seek admission to the United States?

Seems pretty foolproof.

President Trump announced Thursday evening on Twitter, his preferred medium for policymaking, that he plans to impose a new tariff on all imports from Mexico, “until the illegal immigration problem is remedied.”

The tariff would begin at 5 percent on June 10 and gradually rise to 25 percent by October.

Mr. Trump persists in the falsehood that tariffs are paid by America’s trading partners. The truth is that Mexico would no more pay this tariff than it is paying for the construction of a border wall. The evidence is clear: Mr. Trump’s tariffs are taxes being paid by Americans.

This new tax would sit atop Mr. Trump’s tariffs on aluminum and steel imports, and Mr. Trump’s tariffs on Chinese imports, and the bill is adding up. The United States so far has collected about $19 billion in Trump tariffs. A full 25 percent tariff on Mexican goods could add as much as $87 billion a year to that total.

Mexico would most likely respond by imposing retaliatory tariffs, which is especially bad news for the probable targets: American farmers. About two weeks ago Mr. Trump ended a tariff on Mexican aluminum and steel, and Mexico ended a tariff on American farm goods. So much for that false dawn. Farmers may need to resume the search for new markets.

Taxation is always painful, and always the question is whether the benefits outweigh the pain. In this case, Mr. Trump is using a tariff as a cudgel to induce Mexico’s cooperation in keeping immigrants from America’s southern border. While the cost of the tariff would be paid by Americans, the Mexican economy most likely also would suffer a loss of sales to the United States.

Mr. Trump might succeed in pressuring Mexico to take stronger steps on immigration. Tariffs, however, are a very crude tool. Most of the immigrants seeking to cross the southern border are fleeing problems in Central America that are beyond the control of the Mexican government. Moreover, while Mr. Trump tends to refer to all of the immigrants as illegal, many are exercising a legal right to seek asylum.

Past administrations have sought cooperation from Mexico on immigration issues without disrupting economic relations between the two countries. Mr. Trump’s decision to mix the two issues threatens to disrupt both economies because the manufacturing sectors in Mexico and the United States are tightly intertwined. About two-thirds of trade between the countries is between factories owned by the same company, according to Deutsche Bank.

Other American trading partners with whom Mr. Trump is trying to negotiate new trade deals, including Japan and the European Union, presumably are having the same thought.

Last but not least, messing with Mexico weakens the Trump administration’s hand in its dealings with China. Mr. Trump’s tariffs on Chinese goods have persuaded some American companies to relocate production to Mexico from China. Those companies now face a more difficult choice. Mr. Trump and his advisers also may find it more difficult to rally international support for their efforts to persuade China to make changes in its economic policies.

Mr. Trump’s apparent determination to fight with all of America’s trading partners at once makes it harder to make progress on any particular front.

Once again, Mr. Trump is lashing out rather than acting strategically — and Americans will feel the pain.

 

Trump’s Fake Fix for a Bad Economic Policy

What is driving the president’s apparent eagerness to impose tariffs is a simple and wrongheaded idea that plays to a large part of his base: A trade war will spur job growth in America. He is trying to use tariffs to give a leg up to American industries against countries that manufacture the same products that we do — whether steel, aluminum or cars — but more efficiently. And who could be against that if it creates more jobs?

.. In reality, however, creating jobs alone does not make for a strong economy. What we really want is to increase production. And to achieve that, we need to allocate labor as efficiently as possible.

.. One way to do that is to ensure that if other countries can make certain goods more efficiently than we can, we trade with them for these items, rather than manufacture them ourselves. The result is cheaper goods, which is to our advantage.

But tariffs do nothing to improve this efficient allocation of labor. They also do not increase or decrease employment. They just shift jobs around, and almost always in a manner that hurts the economy.

.. That is a $12 billion bailout using taxpayer funds for a problem the president himself created.

 

Trade Fight Threatens Farm Belt Businesses

Many farmers, who depend on shipments overseas for one-fifth of the goods they produce, say they are anxious

Researchers at the University of Illinois and Ohio State University estimate that over four years, a 25% tariff on U.S. soybean imports by Beijing would result in an average 87% decline in income for a midsize Illinois grain farm. The loss would pressure farmland prices, they say, prompting a more than $500,000 decline in the farm’s net worth by 2021.

.. Still, many farmers say they support the Trump administration’s trade goals of modernizing Nafta, shrinking the U.S. trade deficit and combating what they see as unfair trade practices by China. They view the president’s approach as a negotiating tactic and hope it will bear fruit by fall, when farmers will harvest their crops. Some are prepared to sacrifice financially if the U.S. economy benefits in the long run.

.. administration officials have tried to reassure farmers, saying they are considering the use of Depression-era programs, which permit borrowing of as much as $30 billion from the Treasury, as well as other tools to shield farmers from trade-related losses.

..  if farm incomes are significantly squeezed, tensions could emerge between party loyalty and farmers’ wallets. “In a close enough election even a small group can matter,” Mr. Franklin said.

.. Some farmers fear trade battles will jeopardize foreign markets for U.S. agricultural products that took decades to establish.

.. Dairy farmers have been banking on sales abroad to help absorb increasing milk supplies that have pushed down prices. Tariffs imposed on U.S. cheese exports by Mexico, the largest buyer of U.S. dairy products, add insult to injury