What’s Happening with the Trade War?

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What’s Happening with the Trade War?

Francis Klingenberg, Centurion Staff

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The Trump administration’s trade war threatens to escalate, possibly leaving the American economy in a recession and reduced economic growth.

Bucks Economics Professor Stephen Cocca said that in the short term, “the American consumer will most likely pay higher prices for certain items.” Those items primarily are exports from China.
This is because of tariffs imposed by the Trump administration, which are taxes on goods imported into the United States. Cocca gave examples, “Some of these items include washing machines, clothing and toys.”

Cocca continued, “the trade war was initiated by the Trump administration to bargain for better trading terms.” Cocca pointed out that American manufacturing has been transitioned to China for the past several decades.

A tariff list released on Sept. 17, 2018, showed that items such as meats, vegetables, and fruits were having tariffs released. Mineral fuels and chemicals were affected too.

Most items on that list were hit by a 15 percent increase in tariffs, to bring the tariffs up to 25 percent.

In the long run, however, it could send both countries into a recession. “If the dispute continues to escalate, there’s possibly an increased unemployment rate, and reduced economic growth,” explained Cocca.

A report released in Sept. 2019 by Moody’s Analytics delves into the specifics. It says that the trade war between the United States and China has a 50 percent chance of remaining at a stand-still.
However, it has a 35 percent chance of escalating. The unemployment rate could increase by 2.7 percent by 2021 if the trade war continues to escalate.

This report also shows that non-farm employment could decrease 528,600 jobs by 2021 if it continues to escalate.Household incomes don’t fair well either, decreasing as much as $1,272 by 2021. Cocca added, “if both countries agree to terms and reduce barriers, consumers and workers could see benefits.”The Moody’s report a shows the effects of de-escalation has a 15 percent chance of happening.

The unemployment rate could actually decrease 0.7 percent by 2021, and the non-farm employment would increase 126,700 jobs at that time too.

This means that less and less manufacturing jobs can be found in the United States, which leads to a lowered economic growth in the areas around the factory.

However, Economic theory suggests that the displaced manufacturing jobs could transition into technology jobs or other industries.

Moody’s report shows that beyond 2021, the American economy will have caught up with the recession and start to improve.