Expert: 'We are worse off as a world' amid Trump's trade war

The effects of the ongoing U.S.-China trade war on American farmers has been well-documented, and one expert asserts that the scope goes beyond that.

Wes Peterson, a professor of agricultural economics at the University of Nebraska-Lincoln, emphasized the global impact of the trade war.

“Trump says that trade wars are easy to win,” Peterson told Yahoo Finance. “What does it mean to ‘win’ a trade war? Basically, you’ve done damage to part of your economy.”

He continued: “If you start with a world where trade is flowing normally and you start putting tariffs on, you’ve introduced a bunch of inefficiencies and distortions into global markets that will reduce the level of world output. We are worse off as a world.”

President Donald Trump holds up examples of tariffs, Thursday, Jan. 24, 2019, in the Cabinet Room of the White House in Washington. (AP Photo/Jacquelyn Martin)
President Donald Trump holds up examples of tariffs, Thursday, Jan. 24, 2019, in the Cabinet Room of the White House in Washington. (AP Photo/Jacquelyn Martin)

‘Consumers will end up paying a higher price ...’

In 2018, the U.S. trade deficit in goods reached a record $891.3 billion. A New York Times report noted that trade war with China “widened the gap: Stiff tariffs on Chinese goods helped slow China’s economy, crimping American exports, which declined nearly 50% in December from the same month a year before.”

Peterson explained that there are two main effects of the tariffs on China. The first is that it raises the prices for consumers.

“When we raise a tariff in general on steel, it means all the industries that use steel to make things, like cars and refrigerators, will see their cost go up, and they will pass those costs on to consumers,” he said. “So, consumers will end up paying a higher price for cars and refrigerators.”

The second is that is “depresses the price” for foreigners selling into the U.S.

“The [foreign] producers, who are trying to sell in the U.S., see some decline in the prices that they’re receiving.” he said. “They don’t like that, and their governments don’t like it, so the governments almost always will retaliate. That’s what happened with China.”

FILE- In this July 26, 2018, file photo President Donald Trump speaks at the United States Steel Granite City Works plant in Granite City, Ill. The president frequently boasts that the taxes he’s imposed on imports, steel and aluminum and nearly half of all goods from China, have showered the U.S. Treasury with newfound revenue. “We are right now taking in $billions in Tariffs,’’ Trump tweeted last month. “MAKE AMERICA RICH AGAIN.’’ Yet the fact is that tariffs like Trump’s account for barely 1 percent of federal revenue. (AP Photo/Jeff Roberson, File)
In this July 26, 2018, file photo President Donald Trump speaks at the United States Steel Granite City Works plant in Granite City, Ill. (Photo: AP Photo/Jeff Roberson, File)

‘Both the consumer and producer bear the cost’

The trade tensions between the U.S. and China began in March 2018, when the U.S. imposed a 25% tariff on all steel imports and a 10% tariff on aluminum imports.

China retaliated by slapping tariffs on products ranging from pork to fruit and aluminum. One day later, the U.S. announced 25% tariffs on roughly 1,300 Chinese products, worth $50 billion. China, in turn, imposed 25% tariffs on more products, including soybeans.

“The prices of soybeans in China go up because of the tax, the prices for soybean farmers in the U.S. go down because there’s less demand for soybeans, so their price falls,” Peterson said. “So both the consumer and producer bear the cost of this Chinese tariff.”