How Trump’s Approach to Beijing Hurts China
Over the past two years, President Trump’s protectionism has drawn opposition from assorted pundits who claim that it rejects basic economic wisdom. But is the president’s reevaluation of free-trade policies in the context of the current global economy — and specifically, in the context of our issues with China — really the harbinger of disaster these critics claim? As ongoing trade talks between the U.S. and China near their conclusion, it is worth pointing out that the administration’s hard-nosed approach has won the U.S. some important victories.
As Paul T. Haenle, a former China adviser on the George W. Bush and Obama National Security Councils, reportedly put it: “Early on, the Chinese had a very simple narrative that all this trade stuff was about Trump’s short-term political objectives, about getting a tweetable victory. . . . Now, they’re at the other end of the spectrum. Now it’s all about the U.S. trying to block China’s rise.”
Many of the higher-ups in Beijing have proven strategically inept in meeting the threat posed by the new battery of American tariffs, causing an administrative frustration among Chinese policymakers that has been widely covered by the media in recent months. After spending considerable time struggling to understand U.S. motives, China now stands to lose greatly if it does not cooperate with America on trade. While certain American industries have been affected by the trade war, the administration’s retaliatory tariffs have hurt China’s economy far more than our own.
Several economic analysts have noted the disparity. Patti Domm of CNBC reported in September that “economists say China’s growth could be slowed next year by as much as 0.6 percent due to tariffs.” “China,” her article continued, “is likely to take a bigger hit to its economy than the U.S. from the escalating trade wars,” because of its much greater vulnerability to exports and its business cycle. Ethan Harris, the head of global economics at BofA Securities, explained in the same article that, “if you put tariffs across the board on both countries, . . . it’s a four-times bigger hit to China because they export four times as much as they import. . . . The tariffs announced so far could have as much as a half-percent impact on Chinese growth.”
That forecast depended in part on the administration’s ultimate willingness to follow through on its threat to impose retaliatory tariffs. While, after months of escalation, the trade war was placed on hold as part of a “90-day truce” announced in December, the tariffs already in place, combined with the prospect of a tariff increase, proved enough to bring the Chinese government to the negotiating table.
What concessions might the U.S. secure from China in these ongoing talks? In fact, it has already secured one: At the recent G-20 summit in Argentina, where President Trump and President Xi Jinping agreed to the 90-day truce, China also agreed to reduce its tariff on U.S. cars, which had stood at 40 percent. Meanwhile, Chinese officials have said that they will “continue to negotiate [with the U.S. over] lingering disagreements on technology transfer, intellectual property and agriculture,” a significant development given that resolving the former two disputes is one of President Trump’s key goals. President Xi has also promised to classify Fentanyl — a key engine of the U.S. opioid crisis — as a controlled substance, suggesting, according to CNBC, “that people selling the drug to parties in the U.S. would be subject to stiff penalties in China.”
And finally, amid Trump’s threat to “more than double” current tariffs on China, the White House has announced that “China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries.” While it is true that our trade deficit with China has reached record highs even as the administration’s trade war continues, it has increased more slowly than our trade deficit with the rest of the world, and it will matter little if China is ultimately brought into line.
It should be clear at this point that Trump’s hard-line negotiating stance has had an undeniable impact on China. The trade war can be understood only in the context of the Chinese Communist party’s unscrupulous campaign for international dominance. His tariffs, combined with the decision in May to exclude the Chinese military from joint RIMPAC (Rim of the Pacific) exercises after its destabilizing actions in the South China Sea, have gone a long way toward discouraging China’s anti-social, aggressively expansionist economic and military policies.
But there are also more fundamental, structural issues playing out in the background of America’s set-piece trade competition with China. “Throughout the 1980s and 1990s,” Benjamin R. Mandel has said in Current Issues in Economics and Finance, published by the Federal Reserve Bank of New York, “approximately 12 percent of the value of goods shipped globally originated in the United States; by 2010, the share had dropped to only 8.5 percent.” As our share of the global marketplace shrinks, the capitalism-induced democratization of China that was promised for decades has not materialized. The Chinese Communist party has largely managed to harness China’s economic boom to entrench itself in power.
Does economic development lead to the development of representative government over the long term? In the post–World War II age, it has generally seemed to. But at what cost, if a decade-long dictatorial nightmare has to come and go first? Better to keep a despot powerless — at least until a reasonably sane government replaces him — or, failing that, to at least stop his regime from taking economic advantage of us, just as President Trump is now attempting to do with Xi.
America is facing a challenge to its preeminent place in the community of nations from an ascendant China, much as traditionally free-trading Britain faced such a challenge from the more protectionist German Empire at the turn of the last century. Foreign powers are ramping up protectionism and neo-mercantilism to challenge us as the leading, free-trade practicing global power, and we ought to explore the full array of economic and policy options available to meet this challenge, even if we have to go against conventional wisdom in the process. In a post–Cold War world where American dominance is giving way to a more multipolar environment, we should reconsider our approach to the global economy. It would, indeed, be wrongheaded to deny the healthy growth of other nations, even if that means America no longer dominates the landscape in the precise way it once did. But, by the same token, we need to react properly to the changing 21st-century trade landscape, demand justice in the international economy, and back that demand up with unquestioned strength.
We ought simply to evaluate the administration’s trade policies toward China on these terms. Until the day China drops its own unfair industrial and trading practices, and until its ruling government ceases its inhuman crimes and repressions, we should be wary of trade with Chinese companies and of China’s economic growth, and affirm the good that the president’s approach has achieved thus far. Instead of pursuing either neoliberal purism or complete autarky, we would do well to consider the possibility that integrating both free-trade and protectionist principles in an adaptive economic strategy might offer advantages that a more one-sided strategy could not.
