The leaders of the world’s 20 largest economies are gathering in Argentina for the annual G-20 Summit. All eyes will be on President Donald Trump and Chinese President Xi Jinping as they meet face-to-face to discuss escalating trade tensions between the world’s two largest economies. With tariffs on many Chinese goods set to increase to 25 percent in January, both leaders must take this opportunity to de-escalate this mutually damaging trade war that has hurt workers and businesses across the globe.
The stakes for this meeting are high and will determine the future course of this critical trade relationship.
My call for de-escalation is not code for capitulating to President Xi. The technology sector understands why President TrumpDonald TrumpDeputy AG: DOJ investigating fake Trump electors Former Boston Red Sox star David Ortiz elected to Baseball Hall of Fame Overnight Health Care — Senators unveil pandemic prep overhaul MORE is pushing China to address its unfair trade practices and policies. We agree the status quo cannot remain, but increased tariffs are unlikely to create additional leverage on the Chinese. Instead, they will inflict pain on American consumers, businesses, and families and threaten America’s prosperity and technological leadership.
Recently released data shows that U.S.-based businesses are bearing the brunt of the trade war. In September alone, American companies paid over $4.4 billion in tariffs. This represented a 50 percent increase from just one year earlier. These tariffs are passed onto consumers in the form of higher prices and hurt every sector of the U.S. economy.
Whether it is a small business in Maine, a farm in Kansas, or a software company in California, trade supports jobs and local economies across the United States. Trade is the sustenance that allows American innovators to continue to grow and be the best in the world. Without it, the tech industry – America’s “crown jewel” – may not have developed many of the products and software that have made the United States the hub of technological innovation in the 21st century.
But, the escalating trade war between the United States and China threatens to limit the innovative environment that helped develop the smart phone, the personal computer, and scores of other technology products that people rely on daily. In fact, the most recent round of tariffs will raise prices on products, including routers and modems, e-readers, and headphones, according to the Consumer Technology Association. This will likely cost Americans an additional $3.2 billion in the next year alone.
Tech companies manufacture everything from computers to routers to headphones in communities across the United States. However, they still must import certain parts from China that they can’t obtain domestically or from other markets. This exposes them to tariffs on Chinese imports, threatening to increase the price of their products for American consumers and potentially even leading to layoffs for American workers.
The administration’s tariffs are unwittingly providing a competitive edge to non-U.S. firms, as the impact of these challenges mostly falls on American companies. This uneven playing field will create long-term economic consequences that cannot be undone easily.
Unfortunately, in spite of the evidence that more tariffs will do more damage to American businesses, the administration is preparing to double down on this disastrous strategy. If President Trump and President Xi do not strike a deal before January 1st, Washington will increase existing tariffs from 10 to 25 percent on $200 billion of Chinese goods. This escalation would surely invite a tit-for-tat response from Beijing, resulting in yet another round of self-defeating tariffs, further stalling negotiations and allowing China to continue its problematic policies.
Steering towards a failing strategy is not unavoidable. Access to the Chinese market has brought real benefits to a wide range of American companies, including the growth of small businesses, research opportunities for startups, and increased exports of quality American products.
President Trump has the opportunity to broaden the scope of these benefits while reducing the problematic elements of the current trade relationship during his meeting with President Xi.
With both leaders at the negotiating table, now is the time to come to an agreement that ensures China desist from forcing or coercing companies to transfer technology, source code, or encryption keys and allow companies from all countries equal treatment in the Chinese market.
President Trump campaigned as a dealmaker. We urge him to embrace the opportunity to make a deal with President Xi at the G-20 and roll back tariffs in exchange for China taking real and measurable actions to end this trade war before it escalates further.
Dean Garfield is the President and CEO of the Information Technology Industry Council (ITI).