A truce between armed forces fighting each other is usually welcomed; it often means that the killing and destruction will decrease and perhaps produce proposals to end a war that has already had many negative consequences.

Accordingly, the right truce worked out by trade negotiators will bring smiles to many U.S. and Chinese officials who have been working hard to end the trade war between China and the U.S.

While many will continue to deny that this war has been economically costly, the facts emerging from the analysis of that war confirm that it has damaged both economies. Similarly, it has also damaged political relationships between the two countries. While the trade war shows signs of abating, the damage to various sectors of the economy is clear.

The U.S. agricultural sector was hard hit by the trade war, largely a result of the significant decrease of purchases of U.S. farm goods by China. Moreover, general trade between the two economic giants also decreased by $100 billion a year. In addition, foreign investment in the U.S. significantly decreased.

Meanwhile, the arguments concerning the use of tariffs continue. The Trump administration continually trumpets the virtues of using tariffs, while other analysts state that the uncertainty produced by their use complicates the negotiations necessary to reach trade agreements and contributes to the reduction in bilateral trade between the two countries. China’s economic growth rate continues to decrease. That coupled with the problem posed by the decline in China’s birthrate that has obvious implications for its labor force, which under these conditions will continue to shrink, made China more receptive to reaching agreements that would contribute to a reduction in trade tensions with the U.S.

The U.S. and China have also agreed to have talks that center on economic reform and resolution of disputes. This will contribute to resolving economic disputes through dialogue and the building of different ways to resolve conflicts, increasing meetings between high-ranking officials in both governments.

Accordingly, various economic disputes can be handled before they get to a point where they become a crisis. The hope is that continual dialogue and attention to disputes will both improve the relationships between the governments and pave the way for increased economic and political growth. An editorial in the Wall Street Journal concerning tariffs states the following: “The evidence of economic injury from tariffs keeps piling up. Two studies out this month from the National Bureau of Economic Research indicate – again – that U.S. tariffs are paid almost entirely by American consumers, while illustrating how they also act as a drag on U.S. exports.” The evidence is growing that tariffs are injurious to economic health.

Meanwhile, it is obvious from the various arguments related to the use of tariffs and other protectionist devices that free trade is a powerful weapon in increasing productivity from productive resources. While protectionist devices such as tariffs and quotas are often used as primitive protectionist trade policies, the result of their use is to decrease the productivity of your resources and at the same time harshen the economic and political relationships you have with your friends.

Author and educator Dave Kaplan writes from his home in Santa Barbara, Calif.

(1) comment

David Collins

Of course Tariffs affect the economy . It is a punitive tax that is ultimately collected from end users . Useful for combating product dumping by artificially leveling the cost playing field but should be used sparingly . More reason for consumers to price shop .

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