If Donald Trump thought slapping China would divert attention from events in Virginia, he miscalculated. That’s because, just like his slow disavowal of racist protestors, Trump’s move to investigate Beijing’s trade practices is too little, too late.
Directing Trade Representative Robert Lighthizer to probe America’s deficit with China makes for great optics for the reality-TV president.
The economic merits are questionable, though, considering how much China has changed since the 2001 window through which Trump is peering. That was the year China entered the World Trade Organization and assumed, for Trump and his ilk, the boogeyman role Japan once played.
Everyone knows China isn’t a fair trader. Just as the Internet failed to democratize China, WTO conventions were no match for a Communist Party set on bending global institutions to its will.
Beijing’s fat subsidies for China Inc., demands that foreigners operate via joint ventures and share technology, dodgy labor standards and weak intellectual-property protections are all fair game for criticism and action in Washington.
Are Trump’s threatened tariffs on China of between 35% to 45% the answer? Not when you consider what’s afoot in the world’s second-biggest economy.
But are Trump’s threatened tariffs of between 35% to 45% the answer? Not when you consider what’s afoot in the world’s second-biggest economy.
As Trump turns to a weaker exchange rate and resurrects the coal industry, Beijing is pumping hundreds of billions of dollars into research and development to move up the production ladder. Vietnam and Myanmar can have the sweatshops.
With its “Made in China 2025” scheme, Beijing is looking to out-innovate Apple, General Electric, Microsoft, SunPower, Tesla and other posterchildren of Corporate American greatness.
In other words, China is angling to own the electronics, renewable-energy, robotics and transportation industries of tomorrow.
That’s not to say the U.S. shouldn’t get tougher with China. After all, the cost of pirated software, counterfeit goods and compromised trade secrets may range between $225 billion and $600 billion, estimates a US commission. Clearly, we’re talking real money here.
It’ll be quite the irony, though, if Chinese-designed automation technology soon ends up killing more jobs from Seattle to Detroit to Atlanta than cheap mainland labor.
If only Trump’s policies looked ahead as much as they harken back to a bygone era globalization long ago replaced.
Trump has accused China of “stealing” American jobs. If he wants to wrestle them back, Trump should be targeting Vietnam, Indonesia, the Philippines and other Asian nations now lassoing jobs away from China.
A trade war won’t help Silicon Valley maintain its head start on Zhongguancun and Dalian, not with Trump slashing budgets for science, medical research and championing fossil fuels.
Massive tariffs won’t boost productivity to justify America’s wage differentials with the mainland.
They won’t get General Motors or Boeing to fatten paychecks. They won’t fix inequality, help Federal Reserve policies gain more traction, rebuild crumbling infrastructure, or raise the nation’s education standards.
And what of Beijing’s retaliation moves?
And what of Beijing’s retaliation moves?
“The U.S. should cherish the current good trade ties and rapport with China, and any protectionist move will certainly damage bilateral economic relations and hurt the business interests of companies in both countries,” China’s Ministry of Finance said, adding that Beijing “will resort to all proper measures” to defend itself.
The list of possibilities includes tit-for-tat tariffs on US goods, devaluing the yuan, selling Treasury bonds, fewer visas for American passport holders, you name it.
Other risks abound, too. For one thing, Trump can forget Chinese President Xi Jinping getting tougher on North Korea. For another, trade skirmishes could throw China’s unbalanced, bubble-plagued economy off balance, boomeranging back Washington’s way.
For all its competitive threats, China’s 6.7% growth has been a vital engine for Asia and beyond. Take that away and Japan’s 4% growth last quarter will evaporate, while officials from Seoul to Sydney brace for slowing demand.
With scandal-plagued Trump’s legislative prospects in tatters, he’s mulling a Plan B.
Odds of getting Plan A — massive tax cuts and a $1 trillion infrastructure boom — done are falling with Trump’s approval ratings.
Anger over his botched handling of the deadly Charlottesville, Virginia, protests on Saturday could cost Trump even more political capital. Not to mention the Russia investigations catching up with his inner circle.
Bottom line, Trumponomics is looking more like a blame-China strategy, and little more. It may play well to his base, but it won’t make America’s economy great again.