Why Trump's trade war with China may be self-defeating

President Donald Trump’s tit-for-tat trade war with China, with only the occasional olive branch, has become one of the defining battles of his presidency.

While Trump would contend that China is losing that war, former ambassador to the United Nations Samantha Power recently argued that the dispute is hurting both China’s economy and everyday working Americans — including many who voted for the president.

“This is just a sort of mutually assured destruction at the present,” Power said during a wide-ranging interview with Yahoo Finance Editor-in-Chief Andy Serwer on Tuesday.

The comments from Power, who served as ambassador to the U.N. during the Obama administration, came a day before China published a list of more than a dozen items it’s sparing from tariffs next week including shrimp and cancer drugs. A day after that, Trump tweeted that he would delay a planned tariff hike on $250 billion worth of Chinese goods from Oct. 1 to Oct. 15 as a “gesture of good will.” However, a two-week delay doesn’t change the fact that the two sides remain “structurally at odds,” Andrew Polk, co-founder of research firm Trivium China in Beijing, told Bloomberg on Wednesday.

Trump already imposed new tariffs on thousands of consumer items from China on Sept. 1. JPMorgan estimates the tariffs will cost the typical U.S. household $1,000 a year, Yahoo Finance’s Rick Newman reported the day they went into effect.

As Power noted in her interview with Serwer, there are people “getting hurt in the United States.”

Products Walmart worries could get slammed by Trump's trade war
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Products Walmart worries could get slammed by Trump's trade war
1. Mandarin oranges in cans
2. Rawhide for pets

3. Hair care

(Photo by: Jeffrey Greenberg/UIG via Getty Images)

4. Other bath prep

(REUTERS/Lucas Jackson)

5. Dog leashes, dog collars

(REUTERS/Caitlin Ochs)

6. Cat leashes, pet costumes
7. Hard luggage
8. Luggage, tote bags, duffle bags, handbags
9. Travel bags
10. Handbags

11. Backpacks

(Photo by Bradley C. Bower/Bloomberg via Getty Images)

12. Rolled wrapping paper
13. Gas grills
14. Makeup mirrors

15. Vacuum cleaners

(Photo by Tim Boyle/Getty Images)

16. Toothbrush replacement heads
17. Electric razors

18. Air conditioners

(Photo by Stephen Hilger/Bloomberg via Getty Images)

19. HDMI cables, video cables, extension cords, auxiliary cords
20. Oil-less fryers and toaster ovens

21. Bicycles

(Timothy Fadek/Bloomberg via Getty Images)

22. Futons
23. Wooden furniture

24. Miscellaneous furniture, like infant pack-and-plays or patio furniture

25. Mattresses

(Photo by Milbert O. Brown/Chicago Tribune/MCT via Getty Images)

26. Christmas lights

(Patrick T. Fallon/Bloomberg via Getty Images)


Power made the comments during a conversation that aired in an episode of Yahoo Finance’s “Influencers with Andy Serwer,” a weekly interview series with leaders in business, politics, and entertainment.

Not ‘doing any favors for the Chinese economy’

There are already signs the trade war is starting to impair the U.S. economy. A key survey out earlier this month showed factory production in the U.S. shrinking in August for the first time in three years. In other words, Trump’s trade war is taking a toll on manufacturing — which the president has pledged during and after his presidential campaign to bring back to the U.S. Will Trump try to resolve the trade war before the next election?

“It depends on how much President Trump is willing to concede, how much face he feels like he's going to lose,” Power told Yahoo Finance. “But you know, I know one thing, and that's that President Trump will put his own political fortunes above the welfare of the workers that he claims to be representing.”

For his part, Chinese President Xi Jinping likely feels he has the upper hand in the trade war, according to Power. But the Chinese economy might not be as strong as China lets on. While China’s economy is continuing to grow, that growth slowed to 6.2% in the second quarter, according to Chinese officials. That’s the lowest it’s been since it started tracking such data in 1992. Alternative data shows the picture might look even worse for China, the Wall Street Journal reported this week. And the trade war “isn’t doing any favors for the Chinese economy, either,” Power said.

Power, who became U.S. ambassador to the UN in 2013, has commented on China before. In her new memoir, “Education of an Idealist,” she noted that watching live footage of the Chinese government crack down on protesters in Tiananmen Square on TV in 1989 had a profound effect on her.

Before becoming U.N. Ambassador, she won the Pulitzer Prize for her book on America’s response to 20th Century genocide. She has also worked as a war correspondent and served as a professor at the Harvard Kennedy School.

Erin Fuchs is deputy managing editor at Yahoo Finance.


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