According to Trump’s former chief economic adviser, Gary Cohn, the United States’ trade war with China is affecting the United States more than it is affecting China.
In an interview with the BBC, Mr Cohn stated that the ongoing tariff battle with China ended up being “a very convenient excuse” for China to slow down its exhausted economy.
However, whilst China was experiencing a slow down in its economy, the tariff battle was having a major effect on the United States, particularly in its manufacturing and capital investment, which have both taken a massive hit.
Cohn added that the dispute led to the United States having a divided economy, with the services sector unharmed, whilst the manufacturing sector suffering. He labelled this as the “bifurcation” of the economy.
In the interview, Cohn added that he thinks “the Chinese economy is driven by credit and credit availability. Credit and credit availability is determined by the central government. And they can turn it on and they can turn credit off.”
Mr Cohn, who is originally a United States economist and investment banker, served as the director of the National Economic Council ever since Trump initiated his term as President, up until April 2018, after a disagreement with one of Trump’s tariffs. Mr Cohn had announced his resignation from the post after Mr Trump imposed import tariffs on steel and aluminium.
Whilst originally a Democrat, Mr Cohn has offered his services on multiple occasions to Republican politicians as well. Today he is a Visiting Fellow at the Harvard Kennedy School of Government.
In the interview, Cohn stated “I think the Chinese economy was going to slow down with or without a trade war.”
Cohn also added that Trump also viewed tariffs as the way to go for problem-solving, with the idea that the imposition of tariffs would be a possible solution to the trade relations between China and the United States being a “long-time view” of Trump.
However, Mr Cohn, a specialist in the field, warned “I think everyone loses in a trade war. We are an 80% service economy. The service side of the economy is doing very well, because, guess what, it’s not being tariffed.”
According to Mr Cohn, the tariffs had made it very difficult and expensive to import crucial products from China, which in turn counteracted the possible effects of Mr Trump’s tax cuts, originally designed to vitalise the United States’ economy.
Combatting the idea of the tax incentives, Cohn stated that “When you build plant equipment, you’re buying steel, you’re buying aluminium, you’re buying imported products and then we put tariffs on those, so literally the tax incentive we gave you with one hand was taken away with the other hand.”
Concluding about the matter, Mr Cohn said that in order to properly see an increase in job creation in the manufacturing industry in the United States, the ongoing tariff war with China needs to stop as soon as possible.