Gary Cohn, President Donald Trump’s former chief economic adviser, believes that the president’s prolonged trade war with China is backfiring and the U.S. economy is feeling the impact more than intended.
In a recent interview with the BBC, Cohn says the tit-for-tat tariffs have had a “dramatic impact” on capital investment and U.S. manufacturing, and the situation has given China “a very convenient excuse” for its slowing economy.
“I think the Chinese economy was going to slow down with or without a trade war,” Cohn said.
And it doesn’t look like Trump is backing down. On Thursday, the president announced on Twitter that the U.S. will apply a new 10% tariffs on about $300 billion worth of Chinese goods starting on Sept. 1.
Cohn said tariffs are making it more expensive for U.S. companies to import vital supplies from China, and the benefits from Trump’s tax cuts were being offset by the tariffs, which ultimately are paid by U.S. consumers in the form of higher prices.
“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,” Cohn told the BBC. “So we are not seeing the manufacturing job creation. And I think if we get through this tariff situation, there’s a real opportunity to see it here in the United States.”
Cohn said that Trump had a “long-time view” that the tariffs would help resolve trade imbalances between the world’s two largest economies. But Cohn argues that no one wins.
“I think everyone loses in a trade war,” Cohn said. “We are an 80% service economy. The service side of the economy is doing very well, because, guess what, it’s not being tariffed.”
Cohn, the former president of Goldman Sachs, resigned from Trump’s administration back in March 2018 over Trump’s tariffs after starting his term in January 2017.
That may have been obvious as Cohn, who is an advocate of free trade, announced his resignation shortly after Trump decided to impose tariffs on steel and aluminum.
Cohn did praise Trump for targeting China and its theft of U.S. technologies, and the president’s move to ban certain Chinese companies from conducting business within the U.S.
“That has to be fixed,” Cohn said.