Trump trade war makes $89-billion profit

President Trump's trade war with China is set to make an $89-billion profit after compensation payments for China tariffs against U.S. farmers.

Globalists claimed that Americans would suffer the greatest harm from President Trump's trade war with China.  But it is China that is suffering its first current account deficit in 25 years, while the U.S. economy continues to see high growth.

The area of American weakness in the trade war has been U.S. farmers, who are hurting from China's retaliatory tariffs.  But President Trump has authorized the Department of Agriculture to offer "Market Facilitation Program" (MFP) payments of up to $125,000 to small and medium-size farmers.

Trump tariffs slapped on China for unfair trade policies generated about $41 billion in revenue for the U.S. Treasury in F.Y. 2018.  But with China slapping retaliatory tariffs on U.S. exports of soybeans, pork, almonds, cherries, cotton, corn, sorghum, lobsters, and several other crops, the Department of Agriculture has already processed $8.5 billion in payments, and the final cost for the F.Y. 2018 MFP is estimated at $12 billion.

President Trump's recent more than doubling of the tariffs on $200 billion of Chinese goods is now estimated to push U.S. Treasury F.Y. 2019 collections up to $100 billion.  But as a result of steeper Chinese retaliatory tariffs, the U.S. Department of Agriculture is expected to make about $20 billion in MFP payments to farmers in F.Y. 2019.

While President Trump can rightfully claim he is winning the trade war and has an $89-billion profit as "icing on the cake," his globalist adversaries have pivoted and are now arguing that Trump tariffs are not sustainable because it is U.S. consumers who are paying higher prices.  

But a new study by the National Bureau of Economic Research that analyzed the short-run impact from a pass-through of U.S. tariffs to variety-level import prices, imports from countries targeted by U.S. tariffs declined 31.5 percent, while targeted retaliation caused U.S. exports to fall by 11 percent.

Researchers told Reuters, "After accounting for higher tariff revenue and gains to domestic producers from higher prices, the aggregate welfare loss was $7.8 billion," or about 0.04% of American GDP.

Chriss Street is an economist and cofounder of the New California movement.