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For years, President Trump has railed against the threat of Chinese trade. China, he said, was operating on an uneven playing field, using unfair trade practices that supposedly harm the U.S. economy, steal American jobs and contribute to a vast trade deficit that now stands at $375 billion.
“The current trade imbalance is not acceptable,” Trump said during a speech before Asian leaders and dignitaries in Vietnam last November. “The United States will no longer turn a blind eye to violations, cheating or economic aggression. Those days are over.”
On Thursday, he finally took action against Beijing. The president announced his decision to impose tariffs on $60 billion worth of Chinese imports a year and limit China’s capacity to invest in the American technology industry.
Trump and his lieutenants defend their actions as a way to reassert American “sovereignty” over matters of international diplomacy and trade. An investigation launched by the administration in August found a range of “unfair” practices in China, particularly related to Beijing’s apparent theft or forced transfer of intellectual property from American businesses. And, like Trump’s earlier move to slap tariffs on certain steel and aluminum imports from various countries, including some close allies, the latest measures are another sign that Trump is following through on his campaign promises.
News of the move sent the stock market plunging and boosted fears of a looming trade war. The Economist calculated that for every American firm in favor of Trump’s protectionist policies, there may be as many as 3,000 opposed.
“Trade is not zero sum. It helps to grow the standards of living of people around the globe,” wrote Steve Odland, the CEO of the Committee for Economy Development, a pro-free trade think tank, on CNBC’s website. “We need the inexpensive products from outside the country to raise our standard of living. And, with only 5 percent of the world population, we need open access to markets for our own goods to grow our economy. We cannot have one without the other.”
Then, just hours after Trump’s announcement, Beijing showed its willingness to strike back. “China does not want to fight a trade war, but it is absolutely not afraid of a trade war,” said China’s Commerce Ministry in a statement issued Friday morning in Beijing.
The ministry said it had “compiled a list of 120 products worth nearly $1 billion, including fresh fruit and wine, upon which it would impose a 15 percent tariff if the two countries fail to resolve their trade differences ‘within a stipulated time,’” reported my colleague David J. Lynch.
There were no further details about the products that Beijing might target, but there is no lack of options. China, a huge buyer of commercial jets made by the American firm Boeing, could look to Airbus or other non-U. S. companies in a bid to hurt the American aviation industry. American tech companies like Apple and Intel, which have significant manufacturing operations in China, could be squeezed with punitive measures.
Beijing could also mimic the European Union’s potential retaliatory measures against the United States, such as tariffs on Harley-Davidson motorcycles. And it could depreciate its currency, the yuan, to make Chinese exports even more competitive — and further infuriate Trump.
Then there’s the agriculture sector, where China could target American imports of sorghum and soybeans. “China could rely more on South America for soy: Brazil exported more soybeans than ever last year — nearly 51 million tons — and nearly all of it went to China,” noted NPR. “Should China take measures against U.S. soybean imports, it would likely hurt American farmers, a base of support for Trump.”
Beijing seems keenly aware of that. “If China halves the proportion of the U.S. soybean imports, it will not have any major impact on China, but the U.S. bean farmers will complain,” noted an editorial in the state-run Global Times. “They were mostly Trump supporters. Let them confront Trump.”
Indeed, American consumers will be the losers no matter where China may apply pressure. “There is no way to impose $50 billion in tariffs on Chinese imports without it having a negative impact on American consumers. Make no mistake, these tariffs may be aimed at China, but the bill will be charged to American consumers who will pay more at the checkout for the items they shop for every day,” said Hun Quach, vice president for international trade at the Retail Industry Leaders Association, to my colleagues.
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!
— Donald J. Trump (@realDonaldTrump) March 2, 2018
And while Trump’s perennial bugbear is the lopsided deficit between the two countries, economists stress that he is misreading how global trade works. “Retaliatory trade barriers put up by other countries would hurt U.S. exports and offset reduced imports, meaning the trade deficit wouldn’t vanish,” wrote Eswar Prasad for The Post’s Outlook section. “What’s more, lower exports would mean less employment — a possible unintended consequence of Trump’s policy.”
Prasad warned Trump against firing the first shot of a battle no one wants to fight: “A trade war wounds all combatants: It rattles business and consumer confidence, restrains exports, and hurts growth. Many U.S. businesses rely on low trade barriers to create international supply chains that reduce costs and increase efficiency. These could come apart amid the new tariffs. The last time the United States imposed sweeping tariffs, in the 1930s, the effect was to prolong and worsen the Great Depression. Winning a trade war by destroying both imports and exports would be a Pyrrhic victory.”
Yet, Trump seems undeterred. It’s unclear where things go from here. “We don’t know how this is going to turn out,” said Scott Kennedy, director of the project on Chinese business at the Center for Strategic and International Studies, to my colleagues. “It could be resolved in a few months, or it could spiral out of control into a broader strategic rivalry.”
Trump administration officials speak of reshaping the post-World War II international system, whose rules are no longer apparently in the American interest. Critics decry such thinking, given the extent to which Washington wrote those very rules.
“On present form, ‘America First’ is a threat to the entire basis of the multilateral trading system,” wrote Michael Johnson, a former British trade negotiator, in a blog post for the World Economic Forum. He added: “America does seem to be stepping back from its history as a main driver of the open international trading system.”
Trump’s critics are hoping he won’t be also driving the international system wildly off course.
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