Trade War – Effective: Yeah or Nay

I found this chart and blurb on Axios about the effect of the tariffs that the Trump Administration has imposed on imports from China on the bi-lateral trade deficit. At least at first glance, it would appear that the tariffs have had an impact albeit a somewhat smallish effect. On the other hand, the trade war has the potential to be very disruptive for the Ag Economy.

Data: U.S. Census Bureau; Chart: Naema Ahmed/Axios

“Tariffs reduce imports and, all else equal, reduce the U.S. bilateral trade deficit. The complication lies in the fact that China retaliates by reducing imports from the U.S., thus pushing up the bilateral deficit. In addition, the tax cut boosted domestic demand in the U.S. for imports from China and everywhere else. If tariffs hadn’t changed, the bilateral deficit would have likely widened anyway because of the tax cut. “If tariffs remain in place in some sort of ‘extended truce’ we would see a more apparent decline in U.S. imports from China as frontloading will soon be water under the bridge. If all tariffs are removed (the consensus is that this is unlikely) chances are imports would normalize, reversing most of the decline we’ve seen so far.”— Gene Ma, Head of China Research, Institute of International Finance