Trump’s China policy has a 1985 problem

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China is likely to remind Washington that the world's second largest economy also has leverage, as Trump and Xi meet for a second time in Germany. Photo: Reuters / Carlos Barria

It’s deeply painful to watch Donald Trump make China great again.

The U.S. president pulling out of global trade and climate-change accords make Xi Jinping’s government look progressive and magnanimous in ways even China bulls couldn’t have fathomed.

His “fire-and-fury” bluster toward North Korea is the latest signal to Asian leaders that China is becoming the indispensable power America was 202 days ago.

But Trump’s real gift to President Xi is on the economy, as his policies promise to tie one hand behind America’s back.

Say what you want about Xi and his opaque, top-down governing style, he’s preparing China for the world it will encounter in 2025 –- pumping billions of dollars into future generation renewable-energy sources, automation and high value-added industries.

Trump, by contrast, is determined to return America back to the world that existed in 1985, one dominated by an industrial model that globalization long ago replaced.

The original scene of the 1985 crime: New York’s Plaza Hotel, which Trump once famously owned.

It was there in what became known as the Plaza Accord that the US bulldozed then-archrival Japan and those elitists (in Trump’s worldview) in Europe to weaken the dollar, boost the yen, and give Washington something approaching the zero-sum benefits Trump figures should be his for the taking.

And he’s raging to take them back again. The target now, of course, is China, which Trump has accused of “raping” U.S. workers.

Frustrated that Xi won’t do his bidding to tame Kim Jong-un, Trump is weeks -– or perhaps days — away from slapping tariffs on China goods.

Petty as it was, Trump’s import duties on China’s aluminum-foil producers, announced Wednesday, could be a harbinger of a commercial war to come.

Petty as it was, Trump’s import duties on China’s aluminum-foil producers, announced Wednesday, could be a harbinger of a commercial war to come.

Possible tariffs bandied about range from 35% to 45%. Trump also is weakening the dollar, both deliberately and indirectly. Trump’s Treasury Secretary Steven Mnuchin has all but scrapped the “strong dollar policy” that was bedrock US policy for decades.

The chaos of the Trump administration greatly dampens the odds of major market-friendly legislative victories. Investors recall Trump’s suggestions he’s not above defaulting on debt to win a negotiation.

They also know Trump is rarely more than one early-morning tweet away from crashing global markets by launching a trade war. It’s taken just 202 days to imperil the dollar’s safe-haven status.

The problem with such a mindset is the futility of it all. America and China, for all their gripes, are as co-dependent as two economies have ever been.

Discerning where one member of the Group of Two ends and the other begins is a favorite parlor game among economists.

Back in 1985, world powers could hold sway with currency markets and alter economic trajectories decisively and specifically. When it comes to the US and China, gray areas abound in ways that raise the stakes for world markets.

Consider the ways Beijing could push back: dumping $1.1 trillion of U.S. Treasuries; slapping taxes on goods that could shake General Motors and Apple and bankrupt Walmart; devaluing the yuan; cancelling Boeing orders and, by extension, killing roughly 180,000 American jobs; block soya bean flows in ways that slam the Missouri and Mississippi economies; and threaten imports of everything from pharmaceuticals to beef.

At the same time, it’s important to recognize what Plaza Accord-like exchange-rate bullying doesn’t accomplish.

It won’t upgrade America’s pathetic infrastructure, stabilize health care markets, fix the mushrooming opioid-addiction crisis or prepare the workforce for automation and artificial intelligence advancements sure to kill more jobs than China will.

It won’t boost productivity, address inequality or prod executives to boost wages, or make corporate America more innovative.

What is China up to as Trump’s America rediscovers coal?

What is China up to as Trump’s America rediscovers coal?

It’s brainstorming on problems that are already here — from cleaner energy sources -– solar and wind, in particular -– to the forces of automation that Trump Treasury czar Mnuchin thinks is “50 or 100 more years” away.

All that kind of ignorance does is make China great again at the expense of America’s future.

Or how about Trump’s stuck-in-time view of corporate deal making?

His White House recently offered Taiwan’s Foxconn Technology Group $3 billion of perks to build a factory in Wisconsin, creating 13,000 jobs.

Look deeper, though: taxpayers are paying $15,000 per job, per year, to support a company that makes the lion’s share of profits employing mainland China factory workers.

The transaction simultaneously highlights the kind of antiquated thinking that prevailed 30 years ago and the symbiotic relationship between the G-2.

The U.S. has long been arguably the most respected economy because of its ability look ahead and reinvent itself accordingly. Trump dragging Washington’s economic worldview back to 1985 is imperiling those animal spirits.

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