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TOKYO — Both the U.S. and China will suffer from the escalation of their trade war, Thomas Donohue, chief executive of the U.S. Chamber of Commerce, Washington’s biggest business lobbying organization, told the Nikkei Asian Review.
U.S. President Donald Trump said last week that he would raise tariffs to 25% from 10% on $200 billion worth of goods imported from China. Washington had already imposed 25% tariffs on $50 billion worth of goods last year.
U.S. Trade Representative Robert Lighthizer said on Friday that the White House also was planning to place tariffs on “essentially all remaining imports from China,” with a value of roughly $300 billion.
“I am not in support of the long term use of tariffs,” Donohue said in an interview in Tokyo, explaining that U.S. companies would end up paying the higher tariffs and it would further affect the U.S.’s “own economy in terms of exports.”
Unlike Trump, who said on Twitter last week that he is “very happy with over $100 Billion a year in Tariffs filling U.S. coffers,” Donohue emphasized that there are longer term problems with that reasoning because tariffs are paid for by U.S. companies. “No matter who pays what, it is not good” for the U.S. and Chinese economies.
The trade war is likely to intensify further, after China on Monday announced retaliatory duties on $60 billion in U.S. imports to as much as 25% starting on June 1. Donohue said that reaching a positive agreement on trade is in the best interests of both countries.
“Currently, the U.S. economy is very strong,” he said, but “it will be affected, probably significantly,” if the trade war becomes prolonged.
Turning to separate trade negotiations between the U.S. and Japan, Donohue said that it should take more time for discussions on a broader range of issues, including digitalization, services and other non-goods activities.
The U.S. and Japan had agreed to accelerate trade negotiations with the aim of a resolution in April. Donohue said that he is opposed to the recent trend of seeking a “light agreement” with very few issues so that a deal could be reached more quickly.
Rather, “it has to cover a handful of very important issues that are critical to many industries,” he said. “To just have an agreement that’s about agriculture and cars would leave so many others without benefits.”
The U.S. and Japan are holding working-level talks on trade before a meeting between Trump and Japanese Prime Minister Shinzo Abe in Japan later this month.
While the U.S. is expected to say that Japan should lower tariffs on agriculture, the Japanese side appears to be sticking with its assertion that tariff reductions on agricultural imports from the U.S. should be kept to the levels already set by the Trans-Pacific Partnership.
Both sides also are expecting tough negotiations over auto tariffs. Washington could push Tokyo to set quotas to limit automotive exports.
“In the near term we need a deal that is inclusive, because we need an example between two friendly, cooperative nations that many others would follow around the world,” Donohue said.
