The concept of trade is simple — it’s an exchange of goods or services for monetary compensation. Modern international trade is far more complex, which enables politicians to manipulate the facts or just make them up to stir up nationalism. That is precisely what President Donald Trump is doing in regard to the new Chinese trade tariffs.
At a campaign rally in May 2016, Trump said, “We can’t continue to allow China to rape our country, and that’s what they’re doing. It’s the greatest theft in the history of the world.”
It’s true that we have a large trade deficit with China, but a trade deficit does not mean we are just giving China money. All it means is that we purchase more goods and services from China than they purchase from us. Why? Because we love cheaper goods. While China is likely responsible for some, not most, of the loss of manufacturing in the United States, the average American has benefited. Prices on consumer goods “made in China” are cheaper because costs of production there are lower. This way, the average American consumer will have more money in their pocket at the end of the day.
The largest deficit item between the United States and China is computers and electronics, totaling $167 billion in 2017. However, much of that is because U.S. manufactures have the parts assembled in China. What makes international trade so complex is the supply chains that affect all parts of production. Many goods that are traded aren’t completely produced in one country. Therefore, a tariff on that good hurts both countries involved multiple times.
The trade deficit with China this year is the highest since 2015, mostly due to the strength of the U.S. economy and the weakening of China’s economy. While a trade war never benefits either side economically, the current environment is the most optimal for Trump to pursue this type of “war.” However, I doubt that affected Trump’s decision to place tariffs on what will now be $250 billion worth of Chinese goods. If we were in a recession right now, Trump would likely enact even larger tariffs — that would worsen the recession like the Smoot-Hawley Tariff Act did during the Great Depression almost 90 years ago.
While Trump already enacted a 25 percent tariff on $50 billion worth of Chinese goods, this new $200 billion wave will be taxed at 10 percent until it rises to 25 percent on Jan. 1. Ironically, the reasoning is to protect American consumers who will be buying Chinese-made Christmas goods. But if Trump actually wanted to protect American consumers, he would stop with the “whose tariff is bigger now” game and actually have talks with President Xi Jinping. There’s also the other irony that Christmas — a celebration of the nonmaterial Jesus of Nazareth — has become almost entirely about consumerism, but I digress.
Yet talks with China have stalled completely. As the Financial Times reported, “… China declined an invitation to explore further trade talks and summoned Washington’s ambassador to Beijing to protest over sanctions imposed on a Chinese military officer.”
Mike Pompeo said the Trump administration was determined to win the trade war. But no one ever wins a trade war. It’s a lose-lose proposition. Sure, the United States can become a winner in the result of a negotiation surrounding the trade war, but I seriously doubt the ability of any member in Trump’s administration.
The best way to win favorable terms in a trade negotiation is to “gang up” on the trading partner with allies. However, Trump has alienated the United Kingdom and the greater European Union, especially Germany. Relations with Japan are stronger, but Trump still does not have sufficient leverage on China. If he had not so brazenly torn up the Trans-Pacific Partnership, the United States would be in a much better position to deal with China. While there are reports he is reaching out to allies, I doubt that is enough now.
When you have rumors of the 25th Amendment getting invoked, and quotes from scandalous books with members of Trump’s administration supposedly calling the president an “idiot,” who truly has the authority to negotiate on behalf of the president besides the president? I remember last year watching former Secretary of State Rex Tillerson parade around the world, constantly getting contradicted by Trump. And so, trade negotiations between the two largest economies of the world are left in the hands of a celebrity television star who thinks that he can negotiate well, just because he had someone else ghostwrite a book called “The Art of the Deal.”