China-U.S. Tariff War Will Escalate, Says Ex-Trade Negotiator

(Bloomberg) -- The trade dispute between the U.S. and China will continue for the foreseeable future and escalate, and is going to be painful for Americans, according to a former U.S. trade negotiator.

"For the foreseeable future, we’re going to be in a tariff world and we’ll see escalation," said Asia Society Vice President Wendy Cutler, formerly a negotiator at the U.S. Trade Representative. "We’re in for a long-haul with tariffs, but eventually there will be a negotiated solution as both sides will end up hurting too much as this tariff war escalates.”

The administration of President Donald Trump has continued to escalate tensions with China, announcing new tariffs this week in an attempt to force Beijing to negotiate over trade and economic practices that Washington has called unfair. So far, there is no sign of that strategy being effective, with China vowing to retaliate against the most recent U.S. action.

Concerns about China’s unfair trade practices have been building for a while, Cutler said, adding that while she shared the angst of the administration about them, she didn’t support the decisions to impose tariffs. The measures have "caught the attention of China and the world, but I believe they are hurting American workers, consumers and companies," she said at the World Economic Forum meeting in Tianjin, China.

“Everyone forgets now that the $50 billion in tariffs has only been in place a month or two, and it’s a smaller number. Once you put the $200 billion in place, even at 10 percent, and raise that to 25 percent on January 1, those are big numbers," she said. "That’s affecting a lot of imports, both industrial and consumer. So I think that with time, we’re going to see Americans hurting from these tariff increases more and more.”

The idea that imposing tariffs on imports from China will lead to jobs and production returning to the U.S. is not likely to pan out, according to Cutler, as can be seen from the recent case of Ford.

“The president’s assumption that if you can break these supply chains then these jobs will come back to the United States is way too simplistic and I don’t think that’s the way things are going to shake out,” she said.

“I fear that both sides are entering a really hard-line period where it’s getting difficult for both sides to find a way back to the negotiating table," according to Cutler. "We’re in a new world on trade and we’ll have to see how it plays out.”

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