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National Editorial & Columnists

EDITORIALS ELSEWHERE_A Midwest plea to Trump: Do the China trade deal

Both countries have much to gain with an imperfect solution

John Cullerton
John Cullerton

At the moment, the American economy is really two economies. One is chugging along at a respectable rate of GDP growth, with the stock market up by more than 25% since December and unemployment at its lowest level in 50 years. In the other, manufacturing output is falling, Midwest farm bankruptcies are climbing and exports are down.

One big reason for the worrisome news is the U.S. standoff with China over trade issues. President Donald Trump made a priority of getting Beijing to put a stop to theft of U.S. intellectual property, expand access to its markets, curb its subsidies to Chinese companies, and buy more American agricultural goods. Early in his first year, he held talks with Chinese President Xi Jinping at his Mar-a-Lago resort and emerged saying “tremendous progress” had been made on trade issues.

But the apparent breakthrough led nowhere. And the two governments have paired their negotiations with tit-for-tat tariff hikes aimed at forcing each other into concessions. Trump has imposed hefty taxes on goods shipped from China, and Beijing has retaliated by levying tariffs on U.S. goods and halting purchases of American farm products.

China’s Commerce Ministry recently said both sides had agreed to roll back tariffs in a “Phase One” accord that would resolve some of the issues. But Trump promptly denied agreeing to any rollback, asserting, “They want to make a deal a lot more than I do.” More recently Trump said a trade deal was “close,” without providing evidence an end is in sight.

He thinks the harm his tariffs cause to China’s economy will compel it to capitulate sooner or later. But Xi doesn’t have to face voters at the polls next year, or ever. His trade negotiators seem to believe as though the real pressure to settle is on Trump, who must wonder if the economic damage will sink his re-election campaign.

The effects are not pretty. Factory output is down nationally, and manufacturing employment has declined in Wisconsin, Michigan and Pennsylvania – states that were crucial to Trump’s 2016 victory. A study for the Federal Reserve Bank of Atlanta calculated that the tariffs and trade friction “subtracted about 40,000 jobs per month from non-farm payrolls and about $259 billion in sales over the first half of the year.”

Sachin Shivaram, chief executive of Wisconsin Aluminum Foundry in Manitowoc, Wisconsin, told The Washington Post that orders for his firm’s brake housings and conveyor belt motors were off 40% this summer due to Trump’s trade war. “I don’t want to lose my company in the name of what the president is doing,” Shivaram said. “It doesn’t seem like there’s an endgame in sight.”

Agricultural exports to China plunged by more than $10 billion last year, and the administration has had to compensate hard-hit farmers with two rounds of bailout payments totaling $26 billion – with another round reportedly in the works. Sooner or later, consumers are bound to see price increases on goods shipped from China.

Business investment, which got a boost from the 2017 tax reform, has fizzled. Companies can plan when they know what the trade environment will be. But the uncertainties created by the trade war leave business people and farmers groping in the dark.

China, of course, is not exempt from the repercussions. It has taken a hit in exports and manufacturing production. The International Monetary Fund says the U.S. tariffs that have been imposed or threatened could reduce China’s GDP by 1.6%.

In the absence of a deal, both countries have additional tariffs scheduled for December. So it should be obvious to all involved that they need to act soon to settle their differences and return both economies to a semblance of normalcy. Neither country gains from prolonging this impasse. Both stand to reap immediate gains from accepting compromises that improve the conditions for trade between the two countries – and speed the removal of the tariffs each has imposed.

Neither is going to come away with a triumphant victory. But an imperfect settlement would leave both countries better off going forward.

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