On this episode, the Trade Guys and Andrew cover a lot of ground as the US wraps up trade talks with China. Plus, the Congressional Budget Office (CBO)’s 2019 Budget and Economic Outlook report reveals that the administration’s trade wars are hurting the US economy. How is Congress reacting? Will the administration take action?
What We’re Reading
“U.S., China launch high level trade talks amid deep differences”
“The United States and China were set to try again on Wednesday to dig out from a damaging trade war with a new round of high-level talks aimed at bridging deep differences over China’s intellectual property and technology transfer policies.”
“Cabinet-level officials, led by Chinese Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer, are due to begin two days of talks at 9 a.m. EST (1400 GMT) next door to the White House. They come with about a month left in a 90-day trade truce agreed in December by President Donald Trump and Chinese President Xi Jinping.”
“People familiar with the talks and trade experts watching them say that, so far, there has been little indication that Chinese officials are willing to address core U.S. demands to protect American intellectual property rights and end policies that Washington says force U.S. companies to transfer technology to Chinese firms.”
Why it matters: A fresh round of talks with China began took place in Washington, DC this week but deep differences between the two sides still remain, and China hasn’t strongly indicated that it is interesting in addressing central U.S. demands on structural issues.
Key questions: What should we expect out of this round of talks? Why is China apparently unwilling to make concessions on key U.S. demands? Why is China interested in continuing to negotiate if they are not willing to offer what’s necessary to resolve the dispute with the United States?
“U.S. Trade Barriers Will Hurt the Economy, CBO Says, Contradicting Trump”
“U.S. trade barriers will hurt rather than help the economy, according to a new Congressional Budget Office forecast that’s at odds with President Donald Trump’s position on tariffs.”
“The levies – imposed on items including steel, aluminum, and some Chinese goods – will cut real gross domestic product by about 0.1 percent on average through 2029 and fuel ‘uncertainty among investors, which may further reduce U.S. output,’ the non-partisan CBO said in a report Monday.”
“The CBO also estimates new tariffs will increase inflation, adding 0.1 percent to the personal consumption expenditures price gauge by 2022 and boosting prices for private investment by 0.5 percent over the period. By 2022, changes in trade policy will reduce real consumption by 0.1 percent and real private investment by 0.3 percent, researchers said.”
Why it matters: The Congressional Budget Office – a nonpartisan agency within the legislative branch – has found that the administration’s tariffs will harm the economy, not help it as President Trump has claimed. The findings – that tariffs will slash .1 percent off U.S. GDP through 2029, increase uncertainty, bump up inflation, and reduce consumption and private investment – are not surprising but do offer another formal rebuff to the administration’s trade policy.
Key questions: Will the CBO’s findings lead the administration to change course? Why or why not, particularly given that the CBO is nonpartisan and widely respected by economists, and the administration characterizes itself as extremely pro-growth and business friendly?
“Duffy finds 18 co-sponsors for bill to increase Trump’s tariff powers”
“Rep. Sean Duffy (R-Wis.) introduced a bill Thursday that would give President Donald Trump expansive new power to raise tariffs in response to actions taken by other countries.”
“It is the type of power that Trump would welcome, especially as his administration has turned to little-known legal provisions to impose new duties over the past two years. White House trade adviser Peter Navarro has been personally involved in an effort to get lawmakers to support the bill and Trump is expected to mention the legislation during his State of the Union address, according to sources familiar with the effort.”
Why it matters: Two pieces of legislation is being floated in the Congress – one bill to increase the president’s ability to impose tariffs on trading partners that hit U.S. goods with tariffs higher than the U.S. charges on imports, and another bill that would limit the president’s ability to impose national security tariffs. The dueling legislation reveals how divided Congress remains on tariffs and trade authority, and that the president has allies in his quest for higher tariffs.
Key questions: Do either of these bills have any chance of passing? Why or why not? Why is Congress still divided on tariffs and presidential authority when economic reports have concluded that tariffs harm the economy?