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Trump may have saved Christmas but he lost a lot of face

It’s a claim Trump has repeated time and again, but is untrue. It is accurate to say that his tariffs have weakened China’s economy. They have reduced US demand for Chinese products and encouraged companies to shift their production offshore.

Pedestrians pass in front of a Macy's Inc. department store in New York, US,

Pedestrians pass in front of a Macy’s Inc. department store in New York, US, Credit:Victor Blue

But the fact remains: the tariffs are paid by American companies, who pass on some or all of the cost to their consumers.

So far, it has been hard for ordinary Americans to see the economic impact of the tariffs. The early rounds focussed on industrial goods like tractors, chemicals and aircraft engines.

That would have changed with Trump’s next round of tariffs. This 10 per cent impost would apply to US$300 billion worth of goods including products such as clothes, toys, footwear, laptops and mobile phones.

The National Retailers Federation warned Trump he was doubling-down on a flawed tariff strategy that is already slowing US economic growth, creating uncertainty and discouraging investment”.

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Andrew Collier, managing director of Orient Capital Research, said the President was holding “a sword at the throat of the American economy”.

Trump announced the tariffs on August 1. Just 12 days later he folded. His administration announced on Tuesday that it was delaying most of the tariffs until December and was dropping others altogether.

“We’re doing this for the Christmas season,” Trump told reporters. “Just in case some of the tariffs would have an impact on US customers.”

His actions spoke louder than his words. This was a clear admission from Trump that he can only expand his trade war so far without causing serious damage to the US economy.

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Business leaders welcomed Trump’s decision, and the share market soared following his announcement.

But the structural issues underlying the US-China trade dispute remain unsolved.

“We are all just one tweet away from significant volatility,” wrote Joe Brusuelas, chief economist at accounting firm RSM, in a note to clients. “The idea that this is a major source of relief to the economy is not tethered to empirical reality.”

As with the government shutdown at the start of this year, the self-proclaimed master deal maker has capitulated without extracting anything from his adversaries.

Trump may have saved Christmas, but he lost a lot of face. So much for his famous claim that “trade wars are good, and easy to win”.

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