William W. Wade

Guest Columnist

William W. Wade, Ph.D. is an economist living in Franklin.

President Trump’s US-China trade war is having a devastating effect on soybean exports from the Midwest farm belt. Exports are down 97% from 2017. Yet, Trump falsely gloats that the China tariffs 25% increase will force China to pay $100 billion to the U.S. Treasury.

To appease his red state voters, he has spent billions of taxpayers’ money to bail out the ailing farm sector.

Midwest Republican-voters are not the only the only Americans damaged by the trade-war. China has targeted red state America to bear the brunt of Trump’s ill-conceived trade war. T

ennessee whiskey exports, which had been growing steadily, dropped 32% for the 4th quarter 2018 compared to 2017. Middle Tennessee State University reports that Tennessee exports are down $500 million for the 4th quarter. That $500 million will not ripple across Tennessee creating jobs and economic stimulus.

How Americans pay the price of tariffs

World financial markets are down and the 2019 US economy looks shaky. Check out your 401k: retirees have become collateral damage to Trump’s lack of understanding of the economics of foreign trade.

If not China, who is paying for the retaliatory tariffs? The answer is consumers and producers — mostly consumers. A little Econ 101 illustrates Mr. Trump’s tariff falsehoods and their negative economic effects.

Assume China exports $100 of goods to the United States. The U.S. importer pays a 25% duty to the Treasury to receive the goods. If these are products for direct sale, say clothing, most of the now $125 cost of the goods is passed on to consumers. You, me and the financially strapped family down the street pay the 25% tariff.

The added $25 leaves less to spend for other goods and services, which ripples through the economy for a net GDP decline. Industry reduces its investment levels. Who suffers most from this? Shoppers at Walmart and other discounter stores who sell to the Middle Class.

Gary Cohn's resignation should have offered a warning

If the Chinese exports are steel, the tariffs raise the input cost for the US manufacturer to produce, say, vehicles. This raises their cost. Sales decline. The manufacturer and the car buyer split the increase in reduced profits and higher prices. Both have less to spend on other goods and services or reinvest. The reduction ripples across the economy while the President holds tight to his erroneous belief in benefits of tariffs.

Trump’s tariffs amount to a Republican tax that lowers business profits and raises consumer prices. Results? A slow-down in the economy and reduced employment. If Trump sticks-by his huge tariff increases, investors and consumers could be in for a rough economic ride.

Chief Economic Adviser Gary Cohn’s March 2018 resignation to protest Trump’s misguided trade war was a warning for the economy.

No credible economic adviser remains in the White House. Even so, Trump disavowed Larry Kudlow’s May 12 truth-telling to Fox that American consumers would bear the burden from the trade war with China.

Mr. Trump’s repeated denial of economic reality is troubling. But ... he has ignored reality on immigration, foreign policy and climate change. Fasten your seatbelts!

William W. Wade, Ph.D. is an economist living in Franklin working on resource issues across the country. Email: wade@energyandwatereconomics.com.