AP Fact Check: Trump’s Tweets on Trade Battle With China 

President Donald Trump let loose with a morning round of tweets Friday that downplayed the possible consequences of his trade war with China.   


Trump minimized the worth of China’s purchases of U.S. goods and services, which support nearly 1 million jobs in the U.S.; misstated the trade deficit; and ignored the inevitable rise in many costs to consumers when imports are heavily taxed.  


The tweets came as his tariffs kicked in on $200 billion worth of Chinese goods, with another round of tariffs in the offing, and as U.S. and Chinese officials negotiated in Washington. With trade relations between the economic giants seemingly rupturing and the stock market sinking, Trump called the talks “congenial.”  


A look at some of his statements:  


Trump: “Your all time favorite President got tired of waiting for China to help out and start buying from our FARMERS, the greatest anywhere in the World!”  


The facts: The notion that China doesn’t buy from U.S. farmers is false. China is the fourth-largest export market for U.S. agriculture. It bought $9.3 billion in U.S. agricultural products last year.  


As for calling himself “your” favorite president, polls find Trump’s approval rating to be high among Republicans, but it generally ranges between 35% and 45% among Americans overall.   


Trump: “We have lost 500 Billion Dollars a year, for many years, on Crazy Trade with China. NO MORE!”  


The facts: That’s wrong. When sizing up the trade deficit, Trump always ignores trade in services — where the U.S. runs a surplus with China — and speaks only of goods. Even in that context, he misstated the imbalance.  


The U.S. trade deficit with China last year was $378.6 billion, not $500 billion. On goods alone, the deficit was $419.2 billion.      

Trump is also misleading when he puts the deficit in that ballpark for many years. It’s true that the imbalance has long been lopsided, but the U.S. trade representative’s office notes that exports of goods to China have increased by nearly 73% since 2008 and U.S. exports to China overall are up 527% since 2001.  


Nor is the trade gap a “loss” in a pure sense. U.S. consumers and businesses get electronics, furniture, clothing and other goods in return for their money. They are buying things, not losing cash.  

Trump: “Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S.”  


The facts: This is not how tariffs work. China is not writing a check to the U.S. Treasury. The tariffs are paid by American companies, which usually pass the cost on to consumers through higher prices. One theory in support of such tariffs is that higher prices for Chinese imports will encourage consumers to buy goods made in the U.S. or elsewhere instead. But the risk is that consumers could simply respond by spending less than they otherwise would, which would hurt growth. 

The burden of Trump’s tariffs on imports from China and other countries falls entirely on U.S. consumers and businesses that buy imports, said a study in March by economists from the Federal Reserve Bank of New York, Columbia University and Princeton University. By the end of last year, the study found, the public and U.S. companies were paying $3 billion a month in higher taxes and absorbing $1.4 billion a month in lost efficiency.  


A coalition of U.S. trade organizations representing retail businesses, tech, manufacturing and agriculture said this week: For 10 months, Americans have been paying the full cost of the trade war, not China.'' It said:To be clear, tariffs are taxes that Americans pay, and this sudden increase with little notice will only punish U.S farmers, businesses and consumers.” 


Trump: “Tariffs will bring in FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do. Our Farmers will do better, faster, and starving nations can now be helped. Waivers on some products will be granted, or go to new source!”  


The facts: In addition to repeating the canard that China pays the tariffs, he’s failing to account for the damage that tariffs can do.  


By most private estimates, a trade war leads to slower growth rather than the prosperity that Trump is promising. The president’s tweet also goes beyond past claims that tariffs are simply a negotiating tactic to force better terms with China. Trump appears to be suggesting that a tariff increase would generate revenues that could then be spent on farm products and infrastructure, something that might in theory require support from Congress.  


But on their own, tariffs are a clear drag on growth.  


Analysts at the consultancy Oxford Economics estimate that implementing and maintaining the latest increase would trim U.S. gross domestic product by 0.3%, or $62 billion, in 2020. This would be equal to a loss of about $490 per household.  


Economists at Nomura note that gross domestic product this year could take a hit of as much as 0.4% if Trump expands the taxes to all Chinese imports, as business confidence slumped and financial conditions tightened. 

leave a reply: