First the endgame - to reduce or eliminate tariffs on United States goods, to increase our manufacturing base. Also keep in mind that China's current electronics boom and their status as the world leader in electronics manufacturing is based entirely on stealing US technology. China uses a series of maneuvers to keep US goods out of their market, including tariffs, quarantine permits on agricultural goods, and selective use of their value added tax ("VAT").
http://www.idealtaxes.com/post3097.shtml
The result has been that the Unites States imports more than three times as much from China as we export. The result is a loss of a huge amount of manufacturing jobs in this country, notably in steel, aluminum, electronics, toys. The US still has a positive export ratio on agricultural goods, simply because the United States is the greatest agricultural producer on the planet, by far, and the price and quality of US goods overcomes even the phony increased price due to tariffs.
After taking office, President Trump ordered that the commerce department investigate the effect of Chinese tariffs on US steel and aluminum production, and whether the effect on US metals manufacturing presented a threat to national security.
https://money.cnn.com/2018/05/30/news/economy/trump-china-us-tariffs-trade-timeline/index.html
The Trump administration imposed no tariffs on Chinese goods until January of 2018, and then imposed tariffs on Chinese aluminum and steel in March, 2018. The current debate and battle of talking points is that China's steel constitutes just 3% of US steel imports. That is not quite accurate, however, as China uses "transshipping" to make it seem that it is not exporting more steel to the United States.
I would wager that Tim knows a lot more about this than I do, but I understand that the strategy of transshipping is to have China send its steel to Vietnam or Mexico, where it is then processed in some fashion before being exported to the United States. The steel import is then not designated as being imported from China, and is instead listed as a steel import from Vietnam or Mexico, when in fact the steel comes from China.
The current policy is that simply stamping a label "made in Vietnam" will not suffice to avoid the tariff, but if the recipient country processes the steel into pipes or door panels or whatever, then it evades the tariff on Chinese steel.
http://theconversation.com/how-transshipment-may-undercut-trumps-tariffs-95487
What is clear is that China uses tariffs to pump up industries it wants to build its economy. China had low wages and substantial tariffs on clothing, fashion accessories, and other low-end manufactured items for decades, but now wants to take over the higher-paying and higher-profit industries such as semiconductors, where the United States continues to dominate. This NYT article discusses the issue pretty well:
https://www.nytimes.com/2018/05/31/business/china-trade-tariffs-trump.html
China also currently has a massive trade surplus with the United States:
The simple fact of the matter is that United States consumers benefit greatly from China spending its own resources in subsidizing industry and exporting goods at a very low cost. However, the same policies undercut United States manufacturing. Therefore, the money saved on a suit or a bicycle comes at the expense of an American citizen losing his or her job producing that suit or bicycle.
The reason why China can produce and export goods so inexpensively is due to tariffs, but also due to lax environmental regulation and very low wages in comparison to other developed countries:
The undeniable truth of the matter is that wages in China are accelerating quite rapidly, and China's filthy air and water have become such a health concern that the nation's leadership is begrudgingly looking at minimal environmental protections. The only "tool" those government officials have to manipulate manufacturing and trade is tariffs. Therefore, the United States is properly looking to cripple the "tariff weapon" to assist U.S. manufacturing.
Further, in this potential "trade war," China and the United States both stand to lose - but China stands to lose much, much more. The nation gains $375 billion per year in terms of the goods and materials it exports to the United States as compared to the goods and materials it imports. That $375 billion surplus yields billions upon billions of wages for the employees creating those goods and materials and billions of dollars in tax revenues for that production. Currently, about 40% of China's exports to the United States consist of high-profit electronics:
The simple fact of the matter is that the United States is looking to use tariffs and threatened tariffs to REDUCE government-sponsored industry favoritism. If and when the tariff subsidies equalize, then the U.S. will certainly gain manufacturing jobs and revenues, since China is very much a world leader in "gaming" the manufacturing industries.
China is the leader in the use of subsidies and tariffs to promote their industry, but the EU is also a big player in this game:
Again, that graph is not dispositive since China clearly uses "transshipping" to hide a lot of its steel and aluminum exports to the United States, but the graph does depict the substantial amount of subsidized metals that are exported to the United States by the European Union.
Do trade wars hurt the U.S. economy? In the short term, you bet. Long term, not nearly so much as the reduction or elimination of tariffs on U.S. goods by China, Canada, Mexico, the E.U., etc. will bolster our manufacturing, and manufacturing jobs pay very well - quite a bit better than "service industry" jobs:
So the trade wars are painful and expensive short-term, look to pay dividends long-term, and are something that the U.S. unfortunately cannot simply ignore.
