US businesses are stuck in trade war uncertainty
The tariff burden from the U.S.-China trade conflict is “falling almost 100 percent on China,” President Donald Trump’s senior economic adviser Larry Kudlow argued last week. But take a look at what’s happening to business investment in the U.S., and it’s obvious Kudlow is wrong.
Some businesses stand to gain from the president’s trade policy — especially those that compete with Chinese imports. Many others stand to lose. And none can be certain how Trump’s conflict with China will play out over the coming months and years. This leads companies to delay investment decisions, in hopes that the outlook will one day clear up.
Their paralyzing uncertainty is driven by the president’s veering from one position to another. Businesses seem increasingly convinced that he doesn’t understand the basics of international economics. Trump bemoans the relative strength of the dollar one day, declaring China a currency manipulator, and the next he praises dollar-strengthening inflows of foreign investment. With such a tenuous grasp on the facts of the situation, how can he make predictable policy? How can businesses anticipate what he’ll do?
At the same time, events are making the post hoc rationalizations about Trump’s trade regime — that he is actually a radical free trader using tariffs to make trade even more free in the future — increasingly unpersuasive. There’s growing acceptance that the president really is a protectionist to his core.