According to the former chief economic adviser of the United States president Donald Trump, the US economy is being affected by trump’s trade war with China and the import tariffs imposed by both countries on a wide range of each others’ products.
During an interview to the BBC, Gary Cohn said that there has been a “dramatic impact” on US manufacturing and capital investment because of the tariff battle between the two largest economies of the world.
He added that the trade war was “a very convenient excuse” for China to slow down its overheated economy.
Known widely as an advocate of free trade, Cohn resigned from his position in March 2018. Cohn, 59 years, was a Democrat in a Republican administration and therefore was an unusual recruit by Trump. He is also a former president of Goldman Sachs bank.
While the president was set on economic nationalism, he also focused on economic internationalism,
From January 2017 to April 2018, Cohn served as director of the National Economic Council in the Trump administration. He announced his resignation from that position following the announcement by Trump about his decision to impose import tariffs on steel and aluminium.
“I think the Chinese economy is driven by credit and credit availability,” Cohn said during the interview. “Credit and credit availability is determined by the central government. And they can turn it on and they can turn credit off,” he said.
“I think the Chinese economy was going to slow down with or without a trade war,” Cohn said. He further added that the concept that trade imbalances between the US and China could be brought down by the imposition of trade tariffs was a “long-time view” of Trump. However, he supported the attempts by Trump to try and prevent the theft of American intellectual property by China and preventing US companies from gaining access to the huge Chinese market. “That has to be fixed,” he said.
“I think everyone loses in a trade war. We are an 80% service economy. The service side of the economy is doing very well, because, guess what, it’s not being tariffed,” Cohn however also warned.
Since the trade tariffs had been imposed on Chinese imports, getting import vital products from China has proven to be difficult and expensive which has had a countering effect on the positives gained from the huge tax cuts that Trump had introduced to boost and stimulate consumption and investment in the US economy.
“When you build plant equipment, you’re buying steel, you’re buying aluminium, you’re buying imported products and then we put tariffs on those, so literally the tax incentive we gave you with one hand was taken away with the other hand. So we are not seeing the manufacturing job creation. And I think if we get through this tariff situation, there’s a real opportunity to see it here in the United States,” he said.
(Adapted form BBC.com)