U.S. tariffs tactics against China could badly backfire as the international community, including Washington itself, is fighting COVID-19, a U.S. media report has said.
As some hardliners in the White House have bolstered hawkish voices and claimed tariffs or other economic tools against China, Joe Brusuelas, chief economist at accounting and consulting firm RSM US LLP, said "this is pure folly; it's exactly what the U.S. economy doesn't need," U.S. TV network CNN reported on Friday.
Against the backdrop of soaring unemployment and economic slowdown caused by the pandemic to the United States, the imposition of tariffs on other countries, like what is endorsed by the Smoot-Hawley Act during the Great Depression, might merely deepen the ongoing downturn.
"A Smoot-Hawley sequel is an entirely bad idea," Brusuelas said, explaining that U.S. businesses and households would be first affected by the tariffs added to imports from other countries.
Meanwhile, as the Wall Street has been betting on a swift recovery from the recession, a renewed trade dispute will cast a shadow on market confidence, said Deepak Puri, chief information officer for Americas at Deutsche Bank Wealth Management, in an email to CNN.
Republican Senator Marsha Blackburn suggested in a recent interview with FOX NEWS that Washington consider waiving interest payment to China, said the CNN report, noting that China owns U.S. treasuries worth over 1 trillion U.S. dollars according to the Treasury Department. However, analysts cautioned that such a move would be highly destabilizing and could push rating firms to downgrade the U.S. credit rating.
"We don't think this will happen and it is likely to see serious pushback, but we are in totally uncharted water," Chris Krueger, an analyst at Washington Research Group, warned in a note to clients.
"If such a thing were to ever be attempted, it would create the conditions for a global depression," Brusuelas said. Enditem
