Senate Minority Leader Chuck Schumer (D-NY) acknowledges reporters as he arrives for a closed Senate Democratic policy lunch on Capitol Hill in Washington, March 26, 2019. As President Donald Trump reignites a trade war with China, he has found an ally in at least one key Democrat – Senate Minority Leader Chuck Schumer. The New York senator, who has largely cheered the president's efforts to crack down on what officials from both major parties call Chinese trade abuses, backed Trump again on Sunday. In a tweet, he urged the president to "hang tough on China." "Strength is the only way to win with China," said Schumer, who is otherwise at odds with Trump on a wide variety of policy issues. Schumer tweet: Hang tough on China, President @realDonaldTrump. Don't back down. Strength is the only way to win with China. The president plans to increase tariffs on $200 billion in Chinese goods to 25% from 10% on Friday, he tweeted Sunday. He also threatened to "shortly" put tariffs on the remaining $325 billion in Chinese products on which the U.S. has not put duties. Trump's tariff threat upended trade talks with Beijing just as the White House touted progress toward a final agreement to resolve U.S. grievances such as intellectual property theft and trade deficits. U.S. and Asian stock markets plunged on Monday ahead of planned trade talks this week between Washington and Beijing. While Schumer backed Trump's move, other top Democrats stayed quiet about Trump's trade war escalation as of Monday morning. Spokespeople for House Speaker Nancy Pelosi and Rep. Earl Blumenauer, an Oregon Democrat and head of the House Ways and Means Committee's trade subcommittee, did not immediately respond to requests to comment.<doc-sep>Democrats are heading into the 2020 election facing a huge dilemma–how to respond to China’s retaliatory tariffs while maintaining their stance of resistance to virtually everything coming out of the Trump White House. China made this challenge even tougher on Monday when it said it would hike tariffs on around $60 billion of U.S. goods, largely agricultural products such as soy and peanuts, that President Donald Trump has promised to counter with emergency aid to farmers. From the Trump administration perspective, the choice of helping American farmers is easy. The tariffs produce tens of billions of dollars of revenue for the U.S. government, more than enough to offset any lost sales due to China’s tariffs on the roughly $24 billion of U.S. farm products it purchased in the pre-tariff era. As a result, the extra-spending does not increase the budget deficit. Even if new borrowing were required, long-term interest rates are very low–with the yield on 10-year Treasuries sitting near 2.4 percent–minimizing the fiscal impact. What’s more, Trump administration officials see aid to farmers to offset Chinese tariffs as denying China the ability to choose specific Americans to target for economic harm. Providing aid creates a defensive wall around farmers, staving off predatory Chinese actions, in the view of many inside the White House. Aid to farmers, however, would likely have to be approved by Congress. And that’s when it becomes a challenge to Democrats. Would House Democrats approve a farm-aid package proposed by the Trump administration? New York Times columnist Paul Krugman thinks Democrats in the House might not, recently asking, “is there any reason to believe that the Pelosi House would help Trump here?” https://twitter.com/paulkrugman/status/1127961368680960000 But an export subsidy? Maybe there's something I don't know, but that sure sounds like an expenditure that requires Congressional authorization. Am I missing some clause in the law? And is there any reason to believe that the Pelosi House would help Trump here? 3 — Paul Krugman (@paulkrugman) May 13, 2019 Trump administration officials think there is a very good reason the House Democrats would vote for the spending: to help American farmers. While there may be a hardcore of anti-Trump #resist at all costs faction in the Democratic party, allowing China to inflict harm on American farmers in order to deny Trump a “win” would likely be a politically costly move for Democrats, solidifying Trump’s hold on the farm vote and endangering House seats in rural districts. Voting against farm aid would make it harder to blame Trump for the costs to farmers from the trade war. Some Democratic leaders have already signalled approval for the Trump administration’s tough stance with China. “Hang tough on China, President @realDonaldTrump,” Senate Minority Leader Chuck Schumer wrote on Twitter after Trump announced he would hike the China tarrifs. “Don’t back down. Strength is the only way to win with China.” “The president is correct in asserting what we have to do with China,” House Speaker Nancy Pelosi said last week. She added that her biggest problem is that Trump’s tactics are “empowering them to hurt our people.” That last phrase would be difficult to square with a vote against a program designed to minimize China’s ability to harm U.S. farmers. Pelosi has been a China hawk for years. When Trump announced his first tariffs on Chinese goods in March of 2018, Pelosi’s response was to call for even more action to crack down on China. “The United States must take strong, smart and strategic action against China’s brazenly unfair trade policies. Yet, today’s announcement is merely a start, and the Trump Administration must do much more to fight for American workers and products,” Pelosi said.<doc-sep>President Trump sent the stock market tumbling early Monday with a weekend tweet threatening to levy more extensive tariffs on imported goods from China — launching another round of the seesaw between the president’s love of record Dow Jones closings and his firm belief in the merits of coercive trade policy. The specific assertions Trump made, including the idea that “China” bears the majority of the cost of the tariffs imposed on American buyers of Chinese goods, were mostly incorrect. After his tweet, the Dow plunged 450 points on Monday morning. But trade protection is something Trump has believed in for years, and it’s actually an issue on which he seems to have some support from Democrats on Capitol Hill — including Senate Minority Leader Chuck Schumer, who specifically urged him to “hang tough.” But talk of tariffs tends to rattle financial markets, both because the actual tariffs themselves are costly to the United States and because they inevitably raise the prospects of further rounds of tit-for-tat retaliation. China is valuable to American companies as a platform for manufacturing US-branded goods that are sold around the world and as a consumer market for American exports. Higher tariffs on some Chinese goods are not the end of the world, but a total rupture in US-China trade would be. Trump tweeted a mix of lies and threats The US and China have had a range of trade disputes for years, with longstanding tensions ratcheting up after Trump took office. Vice Premier Liu He was scheduled to arrive in Washington this week for talks on this subject, and around noon on Sunday, Trump decided to throw a twist into the plot with a couple of tweets threatening an escalation of American pressure. ....of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No! — Donald J. Trump (@realDonaldTrump) May 5, 2019 The idea that “China has been paying Tariffs to the USA” is a pretty wild misreading of the situation. The way a tariff works is that it’s basically like a sales tax, except instead of being paid on all goods, it’s paid only on imported goods. As with any kind of tax, a tax on Chinese-made goods is obviously bad for Chinese manufacturers. But as with any kind of tax, the financial price is paid in large part by consumers of Chinese-made goods — and, critically, by consumers of domestic goods that compete with Chinese-made ones. Once Trump levies tariffs on Chinese-made appliances, for example, not only does that tend to force Chinese manufacturers to raise prices, but it also tends to encourage American manufacturers to raise prices too since they no longer face as much price competition from China. As Emily Stewart has reported for Vox, Trump keeps saying this and experts keep saying he’s wrong. “It’s just another example of taking where there’s a tiny germ of truth and blowing it up to the point where it’s absurd for his own political purposes,” Michael Klein, a professor of international economic affairs at the Fletcher School at Tufts University, told her in November. Then Monday morning, Trump followed up with another classic Trumpism — simultaneously misstating the scale of the US trade deficit with China and totally mischaracterizing what it is. The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore! — Donald J. Trump (@realDonaldTrump) May 6, 2019 The US trade deficit in goods with China was about $400 billion last year, not $500 billion, and we had a surplus in services. More to the point, when one country runs a trade deficit with another, that does not constitute “losing money.” When foreigners invest in the United States — buying shares of stock in American companies, buying the bonds sold by the US government, financing the construction of houses and office buildings — it generates a pool of money that has to go somewhere. Some of it goes back abroad in the form of American investment in foreign countries. But on balance, foreigners invest more in the United States than Americans invest abroad. That investment surplus allows Americans to buy more goods and services from abroad than we sell to foreigners — a trade deficit. These numbers need to balance out, and there’s nothing inherently good or bad about either of them. The fact that the United States tends to run a trade deficit is most likely a reflection of the fact that the American population is growing faster than that of other rich countries, so it’s a better place to invest. It’s not really clear if Trump genuinely doesn’t understand these points or just enjoys lying, but either way, he is very wedded to these two widely debunked talking points, and most people have sort of tuned it out at this point. But actions speak louder than words, and talk of tariffs has people nervous. The risk is escalation, not tariffs If Trump follows through on his threats, American consumer prices will rise modestly and it will be a smallish problem for most people and a larger windfall for a small number of people who run companies that compete with Chinese imports. There will also inevitably be specific problems and perversities. Trump has put tariffs on imported metals, for example, in order to boost American manufacturing. But many American manufacturers rely on imported metal, and this policy has been very detrimental to companies that make nails. Similarly, while broad tariffs on Chinese imports will help some American companies by undermining their Asian competitors, it will also hurt American companies that rely on Chinese suppliers to make components for them. All things considered, however, inflation is not a big problem in America right now, so higher prices are not the end of the world. What’s more, China will likely respond in part by reducing the value of Chinese currency, which will partially offset the price impact in the United States at the expense of reducing the purchasing power of Chinese consumers. Which gets to the real worry financial markets always have about tariffs, which is not so much the tariffs themselves as what comes next. China could retaliate by cutting purchases of American agricultural goods, buying European airplanes rather than American airplanes, or trying to bias the domestic Chinese auto market against American brands. At that point, talks aimed at deescalation might get back under way. But the US could also counter-retaliate. This kind of “trade war” between the world’s two largest economies could spiral out of control and end up severely damaging the global economy. Trump’s aides tend to say that this is all overstated. That the basic reality is the US economy is in a strong position, that Chinese leaders’ own position is more tenuous, and that Trump is simply an aggressive negotiator playing for advantage. On the other hand, obtaining that advantage requires him to credibly act like someone who doesn’t understand — or doesn’t care about — the potential harms of a giant trade war. The problem is he’s sometimes much too convincing about it. By late morning Monday, however, the stock market seemed to have bounced back, convinced that the whole thing was likely to blow over. For Trump, it’s an inherently difficult line to walk: How can he convince the Chinese he’s serious without alarming investors that he really might be?<doc-sep>
Senate Minority Leader Chuck Schumer backed President Donald Trump on the China trade talks this weekend as negotiations between the United States and the Chinese escalated in the wake of the president’s announced increased tariffs on Chinese imports. Hang tough on China, President @realDonaldTrump. Don’t back down. Strength is the only way to win with China. https://t.co/pZqeR346ov — Chuck Schumer (@SenSchumer) May 5, 2019 Schumer, the Democrat leader in the Senate, backing the Republican president–Trump–on anything in this hyper-partisan era is significant. That Schumer is backing Trump on standing up to the Chinese with more tariffs is even more significant, as it is perhaps one of Trump’s core issues he campaigned on and has been governing on–not some sideshow issue that sometimes finds unlikely pairings on the political poles. President Trump announced during the weekend that on Friday, his administration will hike tariffs to 25 percent on certain Chinese imports and that the rest of Chinese imports that remain untaxed for now will be at the 25 percent rate soon: For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars…. — Donald J. Trump (@realDonaldTrump) May 5, 2019 ….of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No! — Donald J. Trump (@realDonaldTrump) May 5, 2019 This comes after the Chinese sought and received a 90-day delay late last year in the increase in the tariffs as trade negotiations played out. That 90 days were up at the end of March, but the Chinese still have not finalized an agreement with American officials regarding trade policy–and it does not appear, despite initial reports to the contrary, that a deal is likely. The Chinese were going to send a senior delegation to Washington from Beijing this week, but now, reports suggest that may not happen, either. So, as Trump is sticking it to Beijing even harder than he already has, it is perhaps fitting that he is winning approval for the move from the leader of the opposition party in the U.S. Senate. But it is also not surprising that Schumer, a top Democrat, would stand with Trump on China; China has been a bipartisan issue for a while. In fact, on a recent trip Breitbart News went on to Taiwan for the 40th anniversary of the Taiwan Relations Act–which established deep unofficial ties between the United States and Taiwan after President Jimmy Carter in 1979 switched official diplomatic relations to the People’s Republic of China (PRC) on the mainland–a number of Democrats and Republicans were there. Former House Speaker Paul Ryan was accompanied by Rep. Don Bacon (R-NE), a Republican, as well as Democrat Reps. Hank Johnson (D-GA) and Salud Carbajal (D-CA), among others. Also, Democrat Rep. Ro Khanna (D-CA)–in an exclusive interview with Breitbart News on building a bipartisan anti-establishment coalition on ending the U.S.’s endless wars around the globe–detailed how China is America’s greatest strategic competitor. “Our biggest competitor in my view is probably China in terms of who’s going to win the 21st century,” Khanna said. “Is it going to be a free enterprise democracy with America, or is it going to be an authoritarian country like China? China has not been in a war since 1979. They are putting all their resources into building goodwill with other countries and into developing their airports, their bridges, their universities, their artificial intelligence. Why are we involved in wars that are not winnable that are costing us resources that are strategic in winning the 21st century? Instead of all the trillions of dollars that we have spent on these wars, imagine if we built our infrastructure, if we invested in our people, if we helped build our country to make sure that we win in the 21st century.