Trump trade war with China could be catastrophic for GOP and his presidency

Business


In the midterms, China could continue to target agricultural products in states where Republicans hope to pick up Senate seats and avoid a Democratic wave, including Indiana, North Dakota and Missouri. Nebraska GOP Sen. Ben Sasse was among the most critical of Trump’s trade moves on Thursday.

“Hopefully the president is just blowing off steam again but, if he’s even half-serious, this is nuts,” he said. “China is guilty of many things, but the president has no actual plan to win right now. He’s threatening to light American agriculture on fire. Let’s absolutely take on Chinese bad behavior, but with a plan that punishes them instead of us. This is the dumbest possible way to do this.”

Republicans in Washington are tearing their hair out over Trump’s approach. He could be highlighting the strong economy, low unemployment rate and boost from the GOP tax cut bill.

Instead, he’s injected massive volatility into the stock market, ratcheting up uncertainty for companies that export to and do business in China and threatening to worsen inflation through higher consumer prices.

“Wage and price pressures are mounting,” Moody’s Mark Zandi told me on Thursday. “Higher tariffs would only intensify these pressures and cost American jobs. Trump’s tariff gambit better end up in avoiding higher tariffs or they will only add to the overheating risks that are high and rising.”

All of this might be worthwhile if there were a clear outcome in sight that would benefit the United States. But there isn’t. There is a chance that it will all end with some cosmetic announcement by the Chinese that they will reduce some trade barriers. But it’s not likely to be anything monumental. And a small reduction in the U.S. trade deficit won’t mean anything in real economic terms.

The alternative is that the talking war will turn into a real trade war that could slow U.S. growth, tank the stock market, cause Republicans to lose one or both houses of Congress in November.

And it could present the president with Democratic majorities eager to take whatever comes out of the Russia investigation and turn it into impeachment hearings if not actual impeachment votes.

—Ben White is Politico’s chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet Politico Morning Money [politico.com/morningmoney]. Follow him on Twitter @morningmoneyben.





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