Sunil Suwal

The trade conflict between the United States and China, the world's two largest economies, will be one of the most pressing foreign policy concerns for the new US government. The mainstream media claims that Vice President Kamala Harris and former President Donald Trump have vastly divergent plans for America's economic destiny. They do not. When it comes to economic policy, Harris and Trump have a lot more in common than they'd like. Trump's protectionist position is well-known, and his administration has imposed tariffs on a wide range of imports, particularly those from China. However, Harris' stance is far from ideal. She has adopted a "worker-centered" trade policy that bears striking similarities to Trump's "America First" approach. Both highlight the importance of maintaining existing American jobs and industries, even if it means higher costs for frustrated consumers, fewer resources to create new businesses that will lead to greater opportunities for the next generation of workers, and lower economic efficiency.

As President, Trump achieved his goal by imposing tariffs on Chinese goods worth hundreds of billions of dollars, resulting in a trade war with China in 2018. By the time Trump left office, his policies had produced a mixed bag of outcomes. The US trade deficit increased to $679 billion in 2020, reaching its highest level since 2008, while the bilateral trade imbalance with China decreased from $419 billion in 2018 to $311 billion in 2020. The trade war is also expected to cost between 142,000 and 245,000 jobs in the United States. The nonpartisan Tax Foundation believes that Trump's tariffs cost Americans almost $80 billion.

Why would Trump's threatened tariffs be a game of chicken?  When President Trump raised tariffs on steel and aluminum imports, the European Union and Canada responded by increasing tariffs on US exports. Neither side "swerved." (The European retaliatory tariffs have been suspended until March 31, 2025, and will be temporarily replaced with less restrictive quotas.) Trump has attempted to criticize China for a variety of alleged economic violations. He believes that fast action is needed to defend American workers and erase the enormous bilateral trade deficit with other countries. Trump poses a significant threat to that arrangement by threatening to impose tariffs of up to 60% on China, hurting trade between the world's two largest economies. When Trump raised taxes on Chinese imports, China retaliated, and the US government spent more than $20 billion on farmer subsidies to compensate for the lost Chinese market. 

The total value of US imports from China peaked in 2018 and has been significantly lower since then. Tariff income from Chinese imports peaked in 2021 as a percentage of overall imports and has since declined. The record, however, shows that taxes on Chinese imports have not resulted in significant revenue collections. Even at their peak in 2022, tariffs on China amounted for only 1.2% of total US tax revenue.

Trump's proposed tariffs, particularly the 10% to 20% tax on all imports, are expected to disrupt global trade. The Peterson Institute for International Economics estimates that Trump's tariffs will cost a middle-class US household $2,600 per year. In July, Goldman Sachs Chief Economist Jan Hatzius predicted that Trump's tariffs will increase inflation by 1.1 percentage points while lowering GDP growth by half a percentage point. Imported goods would be more expensive, which customers would definitely bear, and a trade war may destabilize global markets.

Harris' targeted tariffs are might be less economically disruptive, but they may be less effective due to their narrow scope. Tariffs may assist the industries they target while harming American consumers, such as keeping electric-car prices high, but they are unlikely to help the US manufacturing industry recover. But this will result in higher inflation. According to Harris, the US should cooperate with China on transnational issues while also condemning Beijing of human rights crimes and global economic power. She lambasted Trump's broad and indiscriminate tariffs, stating they would cost Americans $4,000 per year in increased prices. Harris has not entirely dismissed the use of tariffs. Instead, she has advocated for "targeted and strategic tariffs" that "support workers" in specific cases while allowing prices to be established by free trade. Harris has declared her support for quadrupling tariffs on Chinese electric vehicles to 100% and tripling levies on semiconductors and solar cells to 50%, among other proposed rates.

Sinologists believe Harris will provide greater continuity and stability in US-China trade, at least for the first year or two of her presidency. For China, the United States and its allies, and potentially the entire world, Trump represents a greater range of alternatives, as well as several shocks and the threat of further confrontation. Everyone is of the mind that "compared with a Kamala Harris presidency, a second Trump administration would likely bring a greater uncertainty, instability, and unpredictability."

Economists have expressed concerns about both candidates' policies, stressing differences in their potential effects and noting that both candidates are reckless with government spending. While Republicans pay lip service to reducing waste and abuse, neither Trump nor Harris appear willing to modify the absolutely unsustainable financing of Social Security and Medicare – not even to keep these programs for low-income Americans. Both parties seek to subsidize homeownership. The Republican platform encourages the government to "promote homeownership through tax incentives." The Harris campaign has promised a $25,000 incentive for first-time home purchasers. Both proposals would support housing demand, placing upward pressure on home prices. terrific for existing homeowners, but not so terrific for first-time purchasers. 
The media narrative of stark contrasts hides the fundamental similarities in each candidate’s approaches to economic policy. Both Harris and Trump represent variations on the subject of large, fiscally unsustainable government. Neither the Republican nor the Democratic candidates believe in comprehensive market-oriented reforms. Indeed, the next president will face an increasingly bigger responsibility to continue respectful relationship with China on trade and security matters. The Trump administration placed a series of growing tariffs on Chinese imports worth hundreds of billions of dollars in an attempt to induce Beijing to purchase more American commodities. The Biden-Harris administration has kept most of the tariffs while imposing new restrictions. Instead of relying on the World Trade Organization and other international rules, both recent US administrations used domestic laws to launch an investigation before unilaterally imposing duties. The strategy was widely criticized. For one thing, the result of so many tired and tried ideas is ballooning the US deficits, cronyism and exploding national debt, I am nonchalant of who sits in the Oval Office.

Sunil Suwal

Phd Student

Southwestern University of Finance and Economics

Chengdu, China