Crispus Nyaga

Crispus Nyaga is a Nairobi-based trader and analyst. He started trading more than 7 years ago as a student. He has published in several reputable websites like The Street, Benzinga, and Seeking Alpha. He focuses mostly on G20 currencies, commodities like Crude oil and Gold, and European and American large-cap companies.

In 2016, Donald Trump ran the most unconventional campaigns in recent memory. He campaigned mostly on immigration and trade. On immigration, he promised to build a wall between the US and Mexico and to ban refugees. On trade, he ridiculed the United States for the previous trade deals. He called NAFTA the worst trade deal in the world. He also promised to exit the Trans Pacific Partnership (TPP) that Obama’s administration had negotiated with 12 other countries. After he became president, he terminated the deal, which was in the final stages.

In the first year of his presidency, Donald Trump focused on tax reform, which he delivered within the first year. The reform included the lowering of the individual and corporate taxes. He also focused on deregulating the industry, measures that were taken positively by investors.

This year, he purged his economic team, which was made up of democrat, Gary Cohn. In its place, he surrounded himself with hawkish officials like Peter Navaro and Wilbur Ross. With this company, the president moved to implement his promises on trade. He started by imposing tariffs on all imported steel and aluminium. After that, he announced that he would impose tariffs on Chinese goods worth more than $50 billion. He added more tariffs and now, traders are waiting for additional tariffs worth $200 billion and another one worth $267 billion.

He has also moved to renegotiate NAFTA and just two weeks ago, he announced a deal with Mexico. He then announced that his next target on trade will be Japan, the third largest trading partner.

Therefore, a few months into the conflict, how is the trade war going on? A good place to start is to look at the export and import data between the US and China. The table below from Census Bureau shows the progress.

As shown above, China continues to dominate the US with trade. In fact, the trade deficit is rising as Chinese exports to US increase.

This will probably get worse if Trump continues with his threats on China. There are a few reasons for this. First, a trade deficit is not necessarily a bad thing for a country. This is because a large trade deficit means that the people are spending more money buying goods in the other country. For example, when you go to a shop and buy a loaf of bread. This does not mean that the shop keeper is better than you. In other words, you have not lost the $10 you used to buy the loaf.

Second, China has retaliated against US goods as well. For US, the sectors that have been imparted are more specific than those of China. For example, China has imposed tariffs on US crude oil and agricultural crops. This means that China will likely find alternatives in other countries. This makes American exports less competitive.

Third, the new tariffs will not lower the volume of trade from China. This is because American firms are already heavily invested in China. Therefore, the new tariffs will only lead to higher prices for American consumers. This is evident with the statement released by Apple last week. The company said that the new tariffs will mean a taxation to American consumers. Therefore, as things stand, the US president is losing the trade war.

Was this article helpful?

0 0 0