Trump’s China Deal Leaves the Global Economy as Uncertain as Ever

Jerome H. Powell, the Federal Reserve chair, said last week that the central bank was monitoring weaker global growth and uncertainties arising from trade tensions as well as the impact of Brexit. Mr. Powell warned in September that economic damage could outlast any cooling of tensions, particularly if tariffs remain in place.

“I think if this, perhaps inadvertently, goes to a place where we have widespread tariffs that remain in place for a long time — a more protectionist world — that’s going to be bad for the United States’ economy and for American workers, and families, and also for other economies,” Mr. Powell said at a news conference following the Fed’s last meeting.

Mr. Trump and his advisers have attributed any slowdown in growth to troubles overseas and not the trade war. And the administration continues to insist that China is paying the cost of the tariffs, not American businesses or consumers. Mr. Trump has also argued that Beijing has offset some of the tariff pain by weakening its currency to make its goods cheaper overseas.

But a new paper by researchers at Harvard University, the University of Chicago and the Federal Reserve Bank of Boston suggests that businesses and consumers in the United States are feeling an impact from the trade fight and that the pain could escalate.

Examining the prices paid at the border, the researchers found that almost all of the tariffs’ cost is being passed on from businesses in China to American importers. When it comes to the prices of these goods at American stores, however, they find the evidence is more mixed, suggesting retailers are absorbing at least some of the tariffs, rather than passing the entire cost on to their customers.

The study also examined the impact of China’s retaliatory tariffs on American products. It showed that American businesses have had less success passing on the costs of those tariffs to Chinese importers, likely because of the types of goods being sold.

While China can easily swap Brazilian soybeans for American ones, the types of specialized consumer goods that China sells into the United States, like laptops and smartphones, are harder to substitute.

Article source: https://www.nytimes.com/2019/10/16/business/china-trade-deal-economy.html?emc=rss&partner=rss