September 26, 2018 at 5:00 am ET
American businesses, already feeling pain from the President Donald Trump’s escalating trade war with China, are bracing for more after the president proceeded with 10 percent tariffs on an additional $200 billion in Chinese imports. This has crippled the previously announced trade talks between U.S. and Chinese officials that had been set to take place in Washington.
Last month’s meetings ended without any progress, and the business community had been hopeful that this next round of discussions would be more fruitful. After an ugly summer of tit-for-tat trade war, good news is desperately needed.
Trump rightfully pointed out the need for a better trade relationship with China during the 2016 campaign; populists and businessmen alike knew that change needed to happen, and that Americans were getting the short end of the stick. This was a political win because it was smart policy – some estimates have Chinese theft of U.S. intellectual property as high as $600 billion every year, far more than the value of our two-way trading relationship.
Since then, he’s been true to his word, cracking down on China’s theft of intellectual property and using tariffs on Chinese products aggressively in order to improve the United States’ negotiating position.
American businesses have paid the price as this trade war has played out, and it has caused plenty of short-term pain. My company, Canary LLC, one of the nation’s largest privately owned oilfield services contractors, saw an almost immediate 20 percent increase in the cost of steel when Trump announced the first round of tariffs in March. Our latest order of valves used in hydraulic fracturing operations jumped $180,000 because of duties on imports from China. Few American businesses will be able to absorb a like that for very long and will ultimately pass the additional costs on to their customers.
These additional costs come at a time when America’s energy industry is trying to expand its network of pipelines and other projects to facilitate higher oil and gas exports – part of Trump’s “energy dominance” agenda. Energy dominance will be impossible to achieve if our extractive industries are hamstrung at home, and major markets like China shut out U.S. energy imports, as Beijing has threatened.
The United States and China have already imposed 25 percent tariffs on $50 billion of each nation’s goods. Beijing has named another $60 billion now that Trump has carried through on his latest threat. And while American businesses – from Rust Belt automakers and Texas oil companies to Midwestern farmers and Maine lobstermen – have often been the face of this trade dispute, consumers are (literally) paying the price as well. If the next $200 billion in tariffs is implemented with no end in sight, consumers could be paying more for toys, furniture, electronics, all in time for the holiday shopping season.
The American business community has withstood the pain of retaliatory tariffs and massive supply chain disruption, with the understanding that the Trump administration would pursue specific outcomes within a limited amount of time. But as this dispute worsens and one round of tariffs follows another, it’s getting more challenging to see what the end game is. China should be given room to come back to the negotiating table, not pushed away from it just when talks are starting to heat up.
Yes, China’s growth is slowing, but its central government can act unilaterally to cut taxes or inject liquidity into credit markets. A drawn-out trade war benefits no one, but the Chinese may be better able to wait things out.
Trump’s aggressive trade strategy has brought China back to the negotiating table, and in some ways strengthened the American position. Now is not the time to embarrass our trading partners and jeopardize any talks that could make American businesses globally competitive again.
Dan K. Eberhart is CEO of Canary LLC, the largest independent oilfield services company in the United States.
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