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Trump, China trade war: tariff fight worse after midterm elections

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trump china tariffs 2x1iStock;
David Becker/Getty Images; Samantha Lee/Business
Insider

  • Democrats winning the House will slow many of President
    Donald Trump’s policy proposals.
  • But one item on Trump’s agenda on which he could actually
    double down is his trade war with China.
  • Trump’s ability to attack China without Congress will make it
    easier to escalate the trade war.

The
midterm elections
will have a significant imprint on the
policy course of the next two years, as the GOP push for more tax
cuts, Obamacare repeal, and other wish-list items will likely be
stymied by the Democrat-controlled House.

But the gridlock coming to Washington is unlikely to slow down
one of President Donald Trump’s newest and most impactful
policies: the trade
war with China
. Analysts and economists say the president may
even double down on the fight with Beijing.

“China trade tensions will continue and possibly worsen,” said
Isaac Boltansky, a policy analyst at research and trading firm
Compass Point. “We believe the electoral split-decision will
result in President Trump’s trade rhetoric — especially
with China — becoming more bellicose in the weeks ahead.”

For  his part, Trump suggested a possible deal with China
during a post-midterm press conference on Wednesday.

“We’re going to try and make a deal
with 
China because I want to
have great relationships with President Xi, as I do, and also
with 
China,” Trump said. Trump and Xi are
scheduled to meet on the sidelines of the G20 summit at the end
of November.

But in the same press conference, Trump touted the amount
of money generated by tariffs on roughly $250 billion of Chinese
imports. Meanwhile, the rest of his administration has been
aggressively going after Beijing despite the
president’s recent suggestions
of a possible deal.

Boltansky noted that the complexity of the disagreements between
the US and China, which leaves little hope for a quick deal. And
he said that both Trump’s and Xi’s stubbornness makes it less
likely that the two sides can come to a resolution anytime soon.

There are also reports that the US is
preparing tariffs on all remaining Chinese imports
not
already caught up in the conflict — some $257 billion worth of
goods.

Trump has nothing to do but fight China

The Democratic House takeover may actually mean less likelihood
of congressional intervention to stop the trade war.

GOP House leaders failed to restrain the president’s
escalating tariff wars because they didn’t want to challenge a
president of their own party,” said Daniel Griswold, a senior
research fellow at the pro-free trade Mercatus Center.
“Democratic House leaders in the new Congress are unlikely to
challenge Trump on 
China and
steel because they largely agree with him.”

The GOP is generally viewed as the party more inclined to
support free trade. The party helped pass the North American Free
Trade Agreement, or NAFTA,
in the 1990s.
 Even President Barack Obama’s
Trans-Pacific Partnership received
the bulk of its congressional support
from
Republicans.

Democrats have been historically more skeptical of free-trade
deals, and many party members have been sympathetic to Trump’s
tough talk on China.

The Democratic House triumph will also leave Trump with few
policy options to focus his attention, said James Knightley,
chief international economist at ING.

“The President is likely to focus his attention on areas
where his executive powers give him more leeway to set the
agenda, such as trade policy,” Knightley said. “This suggests
that he is likely to continue pushing hard
on 
China to make concessions
that will contribute to getting the bilateral trade deficit
lower and do more to protect US intellectual property
rights.”

The trade war is a concern for economists who say the new
duties will increase costs for
US businesses
and
consumers
. Ultimately, economists predict that a protracted
trade war with China could cause US economic growth to slow — and
in the worst-case scenario push
the country into a recession
.

Trump’s trade war has been conducted almost exclusively
using executive powers enacted by various acts of Congress. For
instance, the China tariffs were imposed under the auspices of
the Trade Act of 1974. This means that even if they wanted
to, Democrats have few options to slow down the trade war’s
escalation. 

“We expect Trump to lean in heavily on trade — it is one of
the few unilateral policies he can enact in a now gridlocked
Washington,” said Chris Krueger, a policy strategist at Cowen
Washington Research Group.

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