On a growing number of goods, and for a growing number of countries, new U.S. tariffs have gone from being threatened to being implemented this year. But economists remain divided—split exactly 50-50 in this month’s Wall Street Journal survey of private economists—on whether the actions to date warrant being labeled as a “trade war,” or whether they fall somewhere short of that standard.
“Trade war” has always been a term of art. There’s no formal criteria by which something escalates from a “dispute” to a “war.” There’s a long history of tit-for-tats that weren’t generally considered “wars,” and so it’s not necessarily obvious when the “war” threshold is breached. Congress doesn’t formally vote on “declarations of trade war.”
China says the U.S. has launched “the largest trade war in economic history,” but the U.S. has tended to present the tariffs differently. White House officials have sometimes sought to avoid “trade war” rhetoric, instead saying they are in a trade discussion. Or, when using the term trade war, the Trump administration has said China started it and that it is merely taking care of national security and intellectual property concerns. And as President Trump once put it: “trade wars are good, and easy to win.” The European Union, for its part, has steered clear of saying “trade war.”
At one level, the question is purely semantic. Regardless of the label, what’s happened to date is this: Washington imposed tariffs on washing machines and solar panels. Beijing imposed tariffs on sorghum. The U.S. imposed tariffs on almost all steel and aluminum imports. The EU, Mexico and Canada, China and even smaller economies like Turkey retaliated in kind. The U.S. imposed tariffs on $34 billion of Chinese imports, citing intellectual property concerns; China implemented tariffs on $34 billion of U.S. exports the same day. Later this month, Beijing and Washington are poised to impose tariffs on an additional $16 billion in imports.
“Semantics are not important at this stage,” said Gregory Daco, chief U.S. economist of Oxford Economics. “Even if this isn’t a trade war, it could easily veer into one.”
Over the next year, most economists think the level of tariffs will rise. The process is underway to justify a number of additional increases. The U.S. has also threatened global tariffs on automobiles and auto imports, and is considering $200 billion of Chinese imports for additional tariffs. And China might respond with tariffs on an extra $60 billion worth of U.S. goods.
In an effort to settle the “trade war” debate, the Journal’s monthly survey posed the question, “would you say the U.S. is in a ‘trade war?,’” drawing responses from 48 business, financial and academic economists. Exactly 24 said it was in a trade war.
The other 24 said no, with a number offering suggestions for a better term. Six volunteered that they preferred “trade skirmish” at this point. Four said “trade tensions.” Two offered “trade battle” and two said “trade dispute.” Other suggestions included “trade blustering,” “trade tit-for-tat” and “trade tussle.”
(Many economists surveyed work for businesses or industries that are directly affected by the trade-whatever-you-call-it.)
Here are some highlights of economists’ responses:
No. “The tit-for-tat is more of a negotiating ploy driven by politics and economics,” — Jim Meil and Sam Kahan, ACT Research
Yes. “It’s a trade war when it raises production costs, derails capital spending, disrupts supply chains, encourages outsourcing and fuels inflation. You can check all those boxes now.” — Bernard Baumohl, Economic Outlook Group
No. “While there has been some internal debate, we describe the situation as a trade dispute, reserving the label of trade war for a full-blown global escalation that ultimately leads to a global recession.” — Paul Mortimer-Lee, BNP Paribas
Yes. “I believe it is a trade war, though it is a slow moving one, and could spread to the currency markets.” — Scott Anderson, Bank of the West.
No. “We are still in a skirmish with some signs of a cease fire with the EU. A trade war with China, however, seems more likely.” — Diane Swonk, Grant Thornton LLP.
Yes. “The United States is in a trade war with China.” — Jay Bryson, Wells Fargo
No. “If we were , stock prices would be much lower.” — Joseph LaVorgna, Natixis
Yes. “China seems unlikely to give up its advantageous practices without a strong fight. A trade battle with China could have serious consequences, but unfortunately, it’s a fight that needs to be fought.” — Russell Price, Ameriprise Financial
No. “Trade Tussle – we are in the mud, the gloves are off, a few scrapes and bruises, but the punches have not landed (yet).” — Gunnar Blix and Amy Crews Cutts, Equifax
Yes. “Agreements are a long way off.” — Joel Naroff, Naroff Economic Advisors
Read more: blogs.wsj.com