Now it's full steam ahead for Trump's trade war with China
iStock; David Becker/Getty Images; Samantha Lee/Business Insider
- Democrats winning the House will slow many of President Donald Trump's policy proposals.
- But one item on Trump's agenda on which he could actually double down is his trade war with China.
- Trump's ability to attack China without Congress will make it easier to escalate the trade war.
The midterm elections will have a significant imprint on the policy course of the next two years, as the GOP push for more tax cuts, Obamacare repeal, and other wish-list items will likely be stymied by the Democrat-controlled House.
But the gridlock coming to Washington is unlikely to slow down one of President Donald Trump's newest and most impactful policies: the trade war with China. Analysts and economists say the president may even double down on the fight with Beijing.
"China trade tensions will continue and possibly worsen," said Isaac Boltansky, a policy analyst at research and trading firm Compass Point. "We believe the electoral split-decision will result in President Trump's trade rhetoric - especially with China - becoming more bellicose in the weeks ahead."
For his part, Trump suggested a possible deal with China during a post-midterm press conference on Wednesday.
"We're going to try and make a deal with China because I want to have great relationships with President Xi, as I do, and also with China," Trump said. Trump and Xi are scheduled to meet on the sidelines of the G20 summit at the end of November.
But in the same press conference, Trump touted the amount of money generated by tariffs on roughly $250 billion of Chinese imports. Meanwhile, the rest of his administration has been aggressively going after Beijing despite the president's recent suggestions of a possible deal.
Boltansky noted that the complexity of the disagreements between the US and China, which leaves little hope for a quick deal. And he said that both Trump's and Xi's stubbornness makes it less likely that the two sides can come to a resolution anytime soon.
There are also reports that the US is preparing tariffs on all remaining Chinese imports not already caught up in the conflict - some $257 billion worth of goods.
Trump has nothing to do but fight China
The Democratic House takeover may actually mean less likelihood of congressional intervention to stop the trade war.
"GOP House leaders failed to restrain the president's escalating tariff wars because they didn't want to challenge a president of their own party," said Daniel Griswold, a senior research fellow at the pro-free trade Mercatus Center. "Democratic House leaders in the new Congress are unlikely to challenge Trump on China and steel because they largely agree with him."
The GOP is generally viewed as the party more inclined to support free trade. The party helped pass the North American Free Trade Agreement, or NAFTA, in the 1990s. Even President Barack Obama's Trans-Pacific Partnership received the bulk of its congressional support from Republicans.
Democrats have been historically more skeptical of free-trade deals, and many party members have been sympathetic to Trump's tough talk on China.
The Democratic House triumph will also leave Trump with few policy options to focus his attention, said James Knightley, chief international economist at ING.
"The President is likely to focus his attention on areas where his executive powers give him more leeway to set the agenda, such as trade policy," Knightley said. "This suggests that he is likely to continue pushing hard on China to make concessions that will contribute to getting the bilateral trade deficit lower and do more to protect US intellectual property rights."
The trade war is a concern for economists who say the new duties will increase costs for US businesses and consumers. Ultimately, economists predict that a protracted trade war with China could cause US economic growth to slow - and in the worst-case scenario push the country into a recession.
Trump's trade war has been conducted almost exclusively using executive powers enacted by various acts of Congress. For instance, the China tariffs were imposed under the auspices of the Trade Act of 1974. This means that even if they wanted to, Democrats have few options to slow down the trade war's escalation.
"We expect Trump to lean in heavily on trade - it is one of the few unilateral policies he can enact in a now gridlocked Washington," said Chris Krueger, a policy strategist at Cowen Washington Research Group.