On Oct. 9, Georgia Sen. David Perdue visited the UGA College Republicans where he spoke on a range of topics, including trade talks with China. According to the AJC, Perdue has moved closer to President Donald Trump’s position on trade over time. Over 18 months ago, he expressed reservations over using tariffs but has since signaled that he accepts them as a tool — albeit an imperfect one — to use against China in the ongoing trade dispute.
Sen. Perdue’s shift toward protectionist policies is misguided. Using tariffs has hurt the American economy and will continue to do so while the U.S. continues its trade war with China.
Perdue’s new protectionist stances are certainly understandable. According to the Office of the United States Trade Representative, the U.S. had a trade deficit of $378.6 billion with China in 2018. The U.S. only exported $179.3 billion of goods to China, less than a third of the value of $557.9 billion in goods the U.S. imported from China. It is only natural that Trump and Perdue might seek to narrow that gap. In addition, Trump’s strategies might be at least somewhat useful in achieving their goals as he and Chinese leaders announced they reached a possible phase one trade deal as part of a larger trade deal.
However, even if the underlying reasoning is understandable, Trump’s strategies are not the best way of dealing with the trade imbalance because they will also inflict economic harm on the U.S.
Though the economy is still doing well, the trade war is causing it to slow. Tariffs can damage the American economy by raising prices. After Trump announced new tariffs on Chinese goods in August, J.P. Morgan predicted the new tariffs would cause the average American household to lose about $1,000 per year. Furthermore, the unpredictable nature of tariffs makes it difficult for businesses to plan. It was already challenging for businesses with complicated supply chains to predict how much to invest in a given year. That task becomes even harder when new tariffs can throw those supply chains into chaos at any point.
These problems have already harmed the U.S. economy. According to a September 2019 Moody’s Analytics report, the trade war has cost the U.S. 0.3% in real GDP and almost 300,000 jobs. Also, according to NPR, a 5.2% drop in exports due in part to the trade war with China was a factor in slowing GDP growth in the second quarter of 2019.
Trade is a crucial part of the American economy, so it is vital that the U.S. crafts thoughtful, effective trade policies. Unfortunately, our current trade policies threaten to drag down the economy, raise prices and cost us valuable jobs. Sen. Perdue should take a tougher stance against Trump’s trade policies and reassert his support for free trade.