How U.S.-China Trade Spat Could Threaten Manufacturing

In the escalating economic showdown between the United States and China, President Trump is trying to put American shoppers first. The administration did not place tariffs on necessities like shoes and clothes, and mostly spared smartphones from the 25 percent levy on Chinese goods announced this week.

But by shielding consumers, Mr. Trump has put American manufacturers — a group he has championed — in the cross hairs of a potential global trade war. If the measures stand, along with China’s retaliatory tariffs, they could snuff out a manufacturing recovery just beginning to gain steam.

“If you want to spare the consumer so you don’t get this massive backlash against your tariffs, then there goes manufacturing, because that’s what’s left,” said Monica de Bolle, an economist at the Peterson Institute for International Economics. “The irony is, you cannot spare manufacturing from anything because manufacturing is globally integrated. The sector sources its parts and components from all over the world.”

That intricate supply chain often runs directly between the two countries, sometimes in both directions. Chinese factories make wing panels and doors for Boeing’s Next Generation 737 planes, which are assembled by union workers in Renton, Wash. General Motors makes its Buick Envision, a sport-utility vehicle, in Shandong Province, and sells it to American consumers. Construction workers in Denver use building materials manufactured in China, made in part from ethane gas produced in Texas.

A central aim of Mr. Trump’s America First agenda is to bring back pieces of the supply chain lying outside the country. The tariffs announced this week are just a bargaining point in a broader negotiation between the United States and China over trade.

“They are trying to force end-product manufacturers here to use more American content by making it more expensive for them to use Chinese content,” said William Reinsch, a trade expert at the Center for Strategic and International Studies.

The United States trade representative, Robert Lighthizer, has said that the administration carefully conceived the tariffs using an algorithm that would “maximize the impact on China and minimize the impact on U.S. consumers.”

The result is a list of more than 1,300 targets, many of them obscure products that may not deliver a direct hit to consumers’ wallets. The victims include industrial robots, chemicals, medical devices and heavy machinery used in everything from processing food to crushing rock.

Such industries have been a vibrant piece of the economy, adding 224,000 jobs in the past year, the strongest growth since the recession ended nearly nine years ago. But underpinning that rebound has been a strong global appetite for American goods — demand that could now be weakened.

“This is a pretty tenuous recovery, and employment is still at much lower levels than it was before the crisis,” said Mark Muro, an economist at the Brookings Institution. “This is not a super dynamic, healthy industry.”

 

 

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