Try 3 months for $3

ATLANTA — For months, President Trump’s economic advisers have cheered Chinese economic suffering, celebrating every sign of weakness — in stock markets, manufacturing, retail sales, investment — since it surely means China is on the verge of a humiliating capitulation to Trump’s demands.

Catherine Rampell mug

Catherine Rampell

Now might be a good time to put the schadenfreude to rest. Not (only) because it’s a bit gauche; as is becoming increasingly clear, there’s also a self-interest reason to stop rooting for the world’s second-largest economy to falter. When China sneezes, the rest of the world can catch a cold.

Including, perhaps, the United States.

There are multiple avenues through which the U.S.-China trade war has already harmed the United States, of course, many of which I discussed here at the American Economic Association’s annual meetings.

First are the tariffs that the president has placed on hundreds of billions of dollars’ worth of Chinese products. Which sounds like it would only hurt China, except that most Chinese imports targeted by Trump are inputs that U.S. firms need to manufacture their own products.

Some of those Chinese goods have no alternative sourcing, noted Syracuse University economics professor Mary E. Lovely; even when workarounds from other countries are available, they are often not perfect substitutes and lead to higher pricing for U.S. companies (and ultimately U.S. consumers).

Then there are the tit-for-tat tariffs that China has placed on American products. These retaliatory duties have foreclosed new market opportunities and destroyed relationships cultivated over decades by U.S. farmers, manufacturers and other entrepreneurs.

Then there’s the continued uncertainty surrounding the future of our trading relationship with China. This has complicated investment and hiring decisions, not to mention firms’ access to equity-based financing.

While Trump blames the Federal Reserve and Democrats for stock market volatility, the damage his trade wars has wrought is large and quantifiable. Trade policy news has triggered major daily jumps in U.S. stock prices — swings of at least 2.5 percent — four times since March. For context, that happened only seven times before, total, over the previous 118 years, according to University of Chicago professor Steven J. Davis.

In a forthcoming paper with Scott R. Baker, Nicholas Bloom and Kyle Kost, Davis has constructed a new equity market volatility index, based on keywords in news stories about stock market movements.

The index finds that trade-policy uncertainty was flagged in 26 percent of articles related to equity market volatility since March 2018, compared with just 2.7 percent between 1985 and 2015. “Trade policy went from a non-factor in U.S. equity market volatility in recent decades to one of the leading sources in recent months,” Davis said.

Finally, there’s the issue of the Chinese economy itself.

Depending on whom you ask, China may have been overdue for a sharp slowdown, or even a recession, long before the trade war began, given its structural problems. But the trade war could tip the balance. It might lead investors to suddenly re-evaluate China’s long-term growth prospects, Cornell University professor Eswar Prasad told me.

The global fallout from a Chinese recession would be devastating. It would harm many of our closest allies in East Asia — including South Korea and Japan — which count China as one of their most important export markets.

And, of course, there is the fallout for U.S. firms that do business in China. Last week, Apple slashed its revenue forecast, noting that falling sales in China were responsible for more than 100 percent of its global revenue decline. Not because Apple had been directly hit by tariffs but because the Chinese economy was slowing.

“It’s not going to be just Apple,” White House Council of Economic Advisers chairman Kevin Hassett said the next day. “I think that there are a heck of a lot of U.S. companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded next year until we get a deal with China.”

Markets, as expected, plummeted. This was a dunderheaded thing to say out loud, but Hassett was right: Apple isn’t the only U.S. company at risk in a China slowdown.

Ford and General Motors, for instance, have also seen their Chinese sales plummet.

Maybe, as Hassett and others argue, the prospect of a Chinese recession would be so unbearable to Beijing that its leaders have no choice but to give Trump everything he wants. I remain skeptical, in part because Trump can’t decide what he wants.

In the meantime, Team Trump should be careful what it wishes for.

Subscribe to Breaking News

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.

Washington Post columnist Catherine Rampell can be reached at


(2) comments

Rick Czeczok

So bright one what would you suggest? Talk is cheap and you are almost free. So you would allow China to do whatever they want, and then complain after the damage is done. Stupid in, stupid out.....


Well, Ricky, it is SO refreshing to have a superior intellect like you around to put things to rest for the rest of us. Perhaps, however, you might consider that Ms. Rampell is not saying we should let China go scot free on actual issues we have with them in our relationship. Perhaps she is saying that reckless, willy-nilly trade wars are not just counter productive to achieving our objectives, they also undermine world markets and our own economy in the bargain. Is that smart? No. Are you smart? If Donald
Trump turns out to be a thoughtful, studious, well-informed diplomat and technician who is genius at complex negotiation, I might consider you smart. As King Solomon once said: "Though you may be wise, foolish friends will eventually destroy you. Though you may be foolish, wise friends will show and teach you success. This is an easy way to prosper." In short, I don't expect you to prosper.

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.

Thanks for reading. Subscribe or log in to continue.