President Donald Trump’s disruptive trade policies are the biggest threat to an otherwise healthy U.S. economy, business leaders said Wednesday.
“It’s just raising the risk of a bad outcome,” Jamie Dimon, chairman and CEO of JPMorgan Chase and chairman of the Business Roundtable, told reporters at a briefing to discuss the group’s latest quarterly survey of top corporate executives. The survey’s results showed increased anxiety about Trump’s handling of trade policy.
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The survey was conducted from May 16 to June 3, shortly after talks with China on a trade deal collapsed and Trump began taking steps to raise duties on $200 billion worth of Chinese goods to 25 percent. He also has threatened to hit another $300 billion worth of Chinese goods with a 25 percent duty later this summer.
Trump reached a deal with Canada and Mexico last month to lift duties on their steel and aluminum imports, easing North American trade tension. But he almost immediately began threatening Mexico with new tariffs over migrants crossing the border.
Trump dropped his tariff threat last week after the two sides reached a deal. But he continues to hold out the possibility of imposing tariffs if Mexico does not make enough progress in stemming the flow of Central American immigrants seeking entry into the United States.
The group’s CEO Economic Outlook Index decreased 5.7 points in the second quarter to a value of 89.5. That’s still higher than the historical average of 82.6. But the dip likely reflects unease about the direction of U.S. trade policy and uncertain prospects for global growth, the BRT said.
“I would just second Jamie’s comment,” Tom Linebarger, chairman and CEO of Cummins Inc., an Indiana-based engine manufacturer that has operations in China, said at the briefing. “I think trade is the scariest area” in terms of threats to growth.
The Business Rountable is particularly concerned about Trump’s use of national security tools — such as the International Emergency Economic Powers Act and Section 232 of the Trade Expansion Act — to threaten other countries with tariffs, Linebarger said.
The indiscriminate use of those powers diminishes the United States’ ability to address legitimate national security concerns and makes it harder for businesses to plan their activities, he said.
Trump’s use of another trade authority, known as Section 301 of the 1974 Trade Act, to impose a 25 percent tariff on $250 billion worth of Chinese goods to pressure Beijing to make trade reforms also has hurt American companies, the business leaders said.
“In Cummins’ case, and I’ve talked to other companies where it’s the same, the tax from tariffs on China have now outgrown the benefits from the [2017 tax cut]. So our net taxes are essentially higher now than they were before the tax reform act,” Linebarger said.
Trump plans to also impose a 25 percent tariff on almost all remaining Chinese goods, or another $300 billion worth. That would hit many consumer products, such as cellphones, footwear, clothing, televisions and other electronics. In contrast, the duties now in place are mostly on intermediate goods used by manufacturers to make final products.
Businesses want the U.S. government to confront China over its trade practices, Linebarger said, but imposing tariffs on Chinese goods raises costs for consumers and makes U.S. companies less competitive.
“The tariffs are a significant burden and will be for some time,” he said.
Businesses are hopeful Trump and Chinese President Xi Jinping will meet later this month at the G-20 meeting in Osaka, Japan, and put trade negotiations back on track.
Chinese officials have not publicly committed to a meeting, but Trump said again on Wednesday he expected he would meet with Xi in Osaka.
“I’d like to make a deal, but we’ll see what happens,” Trump said.
In the meantime, the Chinese government is making life more uncomfortable for many American businesses that have operations in China, Linebarger said.
“I’m hearing increased reports that things are getting more challenging, especially in the ICT area, the [information] communications technology area,” he said.