When 73-year-old President Donald Trump started his trade war with China in 2018, he said that it was easily winnable, another cliché from the campaign playbook. Faced now with a slowdown and possible recession in 2020, Trump’ chances to winning a second term have been dwindling steadily. Together with the House’s impeachment hearings, Trump prospects in 2020 have eroded daily. But far more than impeachment, the economy weighs heavily on voters minds heading into the 2020 election. Voters defied conventional wisdom and gave Trump a chance in 2016, defeating former Secretary of State Hillary Rodham Clinton by a sizable margin in the Electoral College. While spending his time tweeting about Democrats impeachment hearings, Trump faces some big decisions next week deciding whether or not to finally end the U.S.-China Trade War.
Economic indicators, like the 3.5% unemployment rate are at 50-year lows, 66-year-old Federal Reserve Chairman Jerome Powell cut the Federal Funds Rate Sept. 18, telling markets that he wasn’t sure the Fed could respond to the ongoing China Trade War. Powell essentially put the ball into Trump’s court, something happening next week when U.S. and Chinese trade delegations meet again in Washington. While Trump’s busy defending himself tweeting away about impeachment, the U.S. economy—and his reelection—hangs in the balance. Trump has one last shot to salvage what looks like a flagging economy, no longer expanding, poised for a slowdown and possible recession in 2020. Ending the U.S.-China trade war next week would be Trump’s last-ditch attempt to save the economy. U.S. farmers are at their wit’s end, dealing with the loss of revenue from Trump’s Trade War.
International Monetary Fund [IMF] Secretary-General Christine Legarde estimated the U.S.-China Trade War takes about one-half-percent off the U.S. and Global Gross Domestic Product [GDP]. Legarde’s estimate looks low when you consider the recent slowdown in U.S. manufacturing, leaving the economy heading south. “Remember we were told that trade wars are easy to win,” said Doug Barry, senior communications director for U.S.-China Business Council [USBC]. “That was just as they were beginning a year ago. We found that not to be true, they’re not easy to win,” attesting to the damage Trump’s Trade War has done to the economy and his chances of reelection. If House Democrats were smart, they’d refocus their energy on the 2020 election, not on wasting time on impeachment hearings when the outcome in the Senate remains dismal.
Trump’s economic challenges heading into 2020 are formidable, due largely to his own missteps with China. Exports from the Midwest, where Trump won Electoral votes in 2016, are down 32.5% for the year, with 35 states exporting less goods in 2018 than they did in 2017. U.S. soybeans exports to China were down 98%, a whopping hit to U.S. farmers. Whatever the government subsidies to make up the difference, there’s no way to bring U.S. farmers whole for their loss of revenue. U.S. export trade to China accounts for about 57,570 U.S. jobs, something that can’t be made up by government largesse. “The subsidies that the U.S. government is providing to farmers to make up for lost sales to China are not making up dollar-for-dollar for the loss,” Barry said. Trump’s Trade War has hit Midwest farmer hard, promising to get payback when voters go to the polls in 2020.
Barry worries that even if Trump ended the trade war, China has already gone to other exporters for soybeans and other agricultural products. Resuming sales with the U.S. won’t happen overnight, continuing U.S. farmers’ hardship into the foreseeable future. “China is not sitting around waiting for this trade dispute to be resolved,” Barry said. “Those market for a U.S. farmer could be gone permanently,” indicating the damage to U.S. farmers could be long-lasting. Barry thinks Trump’s approach to the North American Free Trade Agreement [NAFTA] is equally counterproductive, since Mexico and Canada pay virtually nothing in tariffs. When U.S. Trade Representative Robert Lighthizer meets with his Liu He next week, he’d better leave Trump’s chief economic advisers Larry Kudlow and Peter Navarro at the door, both of whom have pushed the current China Trade War.
Trump has one shot next week to savie his reelection bid by ending the U.S.-China Trade War. There’s no margin for error left trying to save the U.S. economy from a hard landing in 2020. Trump must immediately stop $250 billion in new tariffs due to go into effect Oct. 15, if he’s going to see Liu agrree to stop the trade war, currently harming U.S. farmers and consumers. “Certainly there’s a chance that [the damage] could be permanent,” Barry said, hoping that Trump and his negotiation team can finally end the U.S.-China trade war. Already reeling from the Trade War, the U.S. and China continue to lose jobs and revenue, vital for both economies. Trump can no longer pretend he’s winning the Trade War, when U.S. farmers’ products rot in silos across the Midwest. Battleground states like Pennsylvania, Illinois, Michigan and Wisconsin won’t be too kind to Trump this time around.
