In an exclusive interview with the South China Morning Post, American Economist Joseph Stiglitz, who won the Nobel Prize for Economics in 2001, said that Kamala Harris as well as Donald Trump are likely to increase tariffs on Chinese imports, but also added that it is unambiguous that Harris would be much better for the economy than Trump. Stiglitz believes Trump’s policy will result in higher inflation and a weaker GDP, and more inequality and poorer health. The higher inflation is going to be a result of his extremely high increases in the tariffs on China, which particularly hurt ordinary Americans with increased prices of apparel, appliances and other products imported from China. Harris may increase tariffs, but more moderately than Trump, whose threat to reduce or eliminate the independence of the Federal Reserve will also create more uncertainty, which will weaken the economy. Tax cuts for the rich won’t stimulate the economy much, but will create more inequality, he added.
Stiglitz says that both presidential candidates are pushing for weaker economic ties with China, but the difference is that Harris will be de-risking, making the U.S. less dependent on China, and in particular making the West, more generally, less dependent on China in certain areas of technology, whereas Trump has a mistaken zero-sum view of the world, and he has no sense of the capacity of economies to adjust. So raising tariffs very rapidly will be a major distortion of the economy, both in China and the U.S., but more in the U.S., which we will have a hard time adjusting. Tariffs of 10% is one thing, 50% or 60% is another, Stiglitz said.
The Trump and Biden administrations, have been equally strong and aggressive, where they have contended that China has unfairly subsidized products which are of particular importance, like electric vehicles (EVs) and solar panels. There is a big debate in the U.S., Stiglitz said. There are two arguments. One is the allegation that China has an advantage in EVs and solar panels because of government subsidies. Many people believe that is not true. The advantage China has in EVs is a result of a process that began 25 years ago of moving in that direction, the larger EV market in China, and the commitment of so much more resources. So it is not that it has been subsidized, but that there has just been more momentum in China.
The second is that even if China subsidized solar panels, the need for a green transition is more important than the need to create solar panel jobs, and that we should accept cheap solar panels from China, because it is very important for the rapid green transition. Stiglitz view is that the U.S. needs to have the capacity to produce both EVs and solar panels, but that the imperative of making a green transition rapidly means that it should not exclude cheap EVs and solar panels from the market, and should find other ways of developing its capacity, Stiglitz told the South China Morning Post.
Trump has falsely sold the notion that America’s political economic problems were due to China. There was evidence that the rapid increase of imports from China after the accession of China to the World Trade Organization (WTO) did have a very negative effect on the American economy. There is evidence that those places in the country where there was a surge of imports have lower wages, more unemployment and lower property values. So that view is pretty well established now. The question is, do you blame China, or do you blame the U.S. government for not having provided education and help adjust, Stiglitz concluded.
