The headlines today are filled with alarmist language about how Trump’s retaliatory tariffs against China risk setting off a trade war. He’s imposing up to $60 billion worth of tariffs against an array of goods to compensate for a range of Chinese predatory tactics, including theft of intellectual property, subsidy of production below cost, and coercive “partnerships” with U.S.-based companies seeking to do business in China.
Here’s the pity of it all. The financial and political elite had this coming, by denying for decades the reality of China’s mercantilism. I write about this in the current issue of the Prospect. But Trump is pursuing a long overdue correction in a foolhardy way.
The right way to go after China’s predatory state capitalism would have been to keep China out of the WTO until we agreed on some set of symmetrical rules of the road. Clinton and Bob Rubin blew that one.
The elites deceived themselves into thinking that if we let China into the club first, China would evolve into a liberal, free-trade democracy. That sure produced some chuckles in Beijing.
The right way now would be to get together with the EU and mount a common diplomatic offense against China’s mercantilism. Instead, Trump went after the EU as well with his steel and aluminum, and is now facing retaliatory tariffs from Europe against the U.S.
Trump has blown open a door to a long overdue drastic revision of policy—but in the crudest possible way, one that could backfire. His trade advisers, unlike Trump, are serious people. Trade chief Robert Lighthizer, a veteran of trade negotiations, knows how to do this diplomacy right. But this is really complex stuff, and it’s unlikely that Trump will listen to Lighthizer, except on the headlines. (His own lawyer defending him in the Mueller investigation, John Dowd, just quit because Trump refused to take his advice.)
By doing this ass-backwards, Trump almost guarantees that the mainstream press will keep prattling the usual platitudes about free trade good, protection bad, though today a few commentators were beginning to come around. A worthwhile piece is by Peter Goodman of the Times, who emphasizes the need for collective action against China, thus acknowledging that China is a real problem.
Winston Churchill is said to have quipped, “You can always count on the United States to do the right thing, after they’ve tried everything else.” By dithering on the realities of China (and profiting handsomely for it), financial and political elites have left it to Trump to belatedly do the right thing, but in the wrong way.
By the time serious people get back into power in Washington, China may well have convinced key global economic players that the predator is the U.S., and even more damage will have been done. This does not exactly serve to Make America Great Again.
But the blame is not solely with Trump. It is equally to be shared with a generation of globalists who were either naïve or in Beijing’s pocket.
Sow the wind, reap the whirlwind. Or in this case, the windbag. But tragically, a windbag with real power.