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Will escalating trade tensions with China affect U.S. jobs?

After the Trump administration added a 25 percent tariff on over 1,000 Chinese products this week, China responded with tariffs on $50 billion worth of U.S. imports. Effective July 6, the tariffs could impact prices, interest rates and the overall economy. Professor Sharyn O’Halloran of Columbia University joins Hari Sreenivasan for more.

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  • HARI SREENIVASAN:

    To help us sort out what is happening in this back and forth battle and what it will mean to American consumers and the world economy, we're joined now by Sharyn O'Halloran, professor of political economics and international public affairs at Columbia University. So, we are on the verge of a trade war here. To put this in perspective, the American economy is, what, $20 trillion so even if we're talking about a 100 billion, 50 billion this is relatively small to, you know, this isn't going to collapse our entire economy but what are the consequences as this escalates?

  • SHARYN O’HALLORAN:

    Well, already we're starting to see a number of different parts of the economy that are being affected. First of all, we'll have some of the end consumers that are going to be affected that are going to be directly using a variety of different products whether they use steel and so on. But mostly right now with steel and aluminum we're going to be seeing the intermediary users, the auto industry that uses steel or aluminum in their production process that's going to lead to increase in prices. Obviously that's going to impact the daily consumer — you and me, who buy a car, want to. And that can lead to increasing inflation, which could lead Fed to take obviously more aggressive stances in setting rates, which could have impacts in the overall growth of the economy. This, of course, is going to let business people be upset about profits and where they are and their willingness to invest. So that will have impacts on jobs and job prosperity.

  • HARI SREENIVASAN:

    There was the example of washing machines that we set a tariff on earlier and now I think somewhere around 17 percent price increases for washing machines if you go to the appliance store. Talk a little bit about how interconnected the world is today.

  • SHARYN O’HALLORAN:

    A lot of the products that we see on our store shelves even if they might be assembled in China might be sort of made here and you know and there's parts coming from all over the world. So we are most manufacturers are really world class managers of global supply chains. Think of Nike, think of Apple and even if they make the majority of the products here they're really assembling many of the products from all over the world and those products come in bits and pieces to then be "Made in America." And that's just how you keep costs down how you work with comparative advantage and how you work with economies of scale. These are good things. This is why living standards have increased. These are why more people can afford many of those other luxuries that 50 years ago were not even feasible.

  • HARI SREENIVASAN:

    There's this constant drumbeat from the administration that says one of the reasons that we're doing this is to try to put the pressure on China for intellectual property concerns that businesses have the kinds of money that we can invest in the country, right? And then really the other common refrain is is to bring jobs back to the United States. So tell me the connection of if we have these trade imbalances corrected, if we slap more tariffs on China and the EU, does that automatically mean that those jobs manufacturing jobs or otherwise come back to the United States?

  • SHARYN O’HALLORAN:

    No they don't. Many cases they don't exist in the form that they used to before. And many of them are there for robots. They're automated and you say oh they've moved to Mexico. Well, they used to move to Mexico then they moved to China, now they're in Vietnam so it's just where you look for economies of scale, cheap labor and automation and those are moving the supply chain around. So that's one thing. Second, that's not our comparative advantage. Americans are very good at high end specialties. And so, even when we talk about bringing back steel we're not doing mass rolled out steel, we're doing more of the high end specialties deal structures that go into buildings but that's not just rolled sheet. So we have to be careful about what we're talking about. The tariff in itself is not going to lead to those jobs coming back. And we have to realize that that's not the tool that we need to be looking at. Now, so the tariff is not the tool but what we have to concern ourselves with are issues around non-tariff barriers and that goes to the policies around the transfer of technology. There, they, both the EU and the US are trying to level the playing field. And that is an appropriate concern and a policy for the WTO to take up and there have been series of complaints going in there so that we can have a greater investment in there without having to lose our property rights over that technology. We don't ask that from China, So why should they ask that from us. So that's that's what that's that's the debate there,

  • HARI SREENIVASAN:

    A lot of these things will be untangled over the next few weeks. Sharyn O'Halloran of Columbia University thanks so much for joining us.

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