The Trump Administration's Tariffs On China Are Not Having The Desired Effect So Far

Oct 12, 2018
Originally published on October 12, 2018 6:56 pm
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MARY LOUISE KELLY, HOST:

President Trump promised to cut the U.S.-China trade deficit. Well, just the opposite is happening. That gap reached a record level in September. NPR's Jim Zarroli explains.

JIM ZARROLI, BYLINE: The trade deficit is the difference between what the U.S. buys from China and what it sells there. And in September, the gap reached $34 billion, a 14 percent increase over the same month a year ago. Treasury Secretary Steve Mnuchin told CNBC today there's a simple reason for the increase.

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STEVE MNUCHIN: My guess is it's more of a reflection of people loading up in advance of tariffs.

ZARROLI: Mnuchin says a lot of American companies were rushing to buy Chinese products before the Trump administration's tariffs took effect. Economist Doug Irwin of Dartmouth College says that could account for some of the increase, but the trade gap has been growing all year. And Irwin says the reason is that Americans are just buying a lot.

DOUG IRWIN: When the U.S. economy's growing and doing well, our trade deficit goes up because we're buying a lot more from the rest of the world. And China of course is a major supplier.

ZARROLI: Irwin says part of the reason people are spending more is the Trump tax cuts, which have put more money in people's pockets. The dollar is stronger against China's currency. And there's another reason the trade gap is wider. When the U.S. imposed tariffs on China, China retaliated with tariffs of its own.

IRWIN: U.S. exports to China have really taken a hit, particularly soybeans and other agricultural commodities. When they imposed their tariffs, those exports really were stopped in their tracks.

ZARROLI: This dynamic could change as the year goes on. The U.S. is scheduled to increase tariffs on Chinese goods even more in January if trade talks with Beijing haven't yielded any results. That may finally make Chinese products expensive enough that American consumers buy fewer of them. Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.