Among the many things lost by the media’s obsession with Hillary Clinton’s emails during the 2016 presidential campaign was Donald Trump’s promise to impose tariffs of 45 percent on imports from China.
Clinton was widely expected to win — indeed, she pulled in a popular vote victory of 3 million votes. But in the Electoral College, which matters most, about 80,000 voters in three states set our course with a Trump presidency.
And from nearly the start, it has been defined by trade tensions with Beijing. They intensified this month with the administration raising tariffs to 25 percent on $200 billion in Chinese goods, and China retaliating with counter-duties on $60 billion in U.S. imports.
Beyond daily market swings and posturing by each side, the more important questions surround the long arc that this presidency has set us upon.
Yes, even if a Democrat wins in 2020, the candidates and party leaders have been faint in their criticism of Trump trade policy or even supportive (even though most average Democrats back trade agreements and oppose these tariffs).
Restoring the American-led rules-based world order — of which freer trade was a pillar — may not be so easy. Encouraging the peaceful rise of China and nudging it into this order as an equal member — U.S. policy from the 1970s until 2017 — may not be possible now.
Dean Acheson, secretary of state in the Truman administration and moving force behind the establishment of that system after World War II, titled his Pulitzer-winning memoir, “Present at the Creation.”
We are present at the destruction.
Chad Brown and Eva Zhang of the Peterson Institute for International Economics warned that Trump’s trade war is headed toward levels of the Smoot-Hawley tariff.
That was the infamous trade law of 1930 which historians and economists widely blame for helping turn an economic contraction into the Great Depression.
With an expansion wind at its back, this administration doesn’t seem worried.
But, Brown and Zhang write, “From China’s perspective, there is one important way in which Trump’s tariff escalation is worse than the U.S. protectionism of the 1930s. In the 1930s, the United States applied the Smoot-Hawley tariffs to imports from all trading partners. To date, Trump’s actions show that China is being discriminated against in the U.S. market far more than most other foreign suppliers.”
In other words, American actions reinforce Chinese resentment over the nation’s “century of humiliation” at the hands of the West and Japan. And they give President Xi Jinping the opportunity to stoke nationalism and point to a foreign adversary, tamping down domestic discontent over Communist Party failures and tightening authoritarianism.
This is dangerous territory. Add a trade war to the strategic flash points between the world’s two largest economies (Taiwan, the South and East China seas), and the result could eventually be war-war. China is a nuclear-armed power.
Even avoiding that, both nations will be poorer from this trade conflict.
Tariffs are taxes, and Trump’s levies on Chinese goods have been paid exclusively by American companies and consumers.
But let’s not kid ourselves. Escalation will eventually slam Washington state hard, with China being our largest export destination. Agricultural products from the state have already been hit. In some cases, this affects exports that took years of work to get past Chinese barriers. Boeing, the largest exporter, hasn’t been targeted yet — but that could change if the trade war worsens.
To be sure, China is often a bad trade partner. It has forced American companies to build factories there and transfer technology as a price of entry to the world’s most populous market. It has stolen U.S. technology and intellectual property while unfairly subsidizing state-run companies.
Yet China and America have both benefited from the “Chimerica” relationship now being stressed to the shattering point. American consumers eagerly bought cheap stuff from China. Industrialization and access to the U.S. market was critical to building a Chinese middle class. Chimerica’s low prices kept inflation down.
Trump is obsessed with the trade deficit, a silly metric for policy. I run a “trade deficit” with Dan’s Belltown Grocery and the merchants of Pike Place Market, but so what? I get tasty and abundant food; they get my cash.
Having citizens with high consumption and low savings, it’s natural that the United States runs a trade deficit, too. Because we enjoy the world’s reserve currency — a priceless asset — the deficit is especially meaningless for pegging trade policy.
Yet based on reporting about the negotiations, American officials were focused on getting China to buy more American goods. Washington claimed the Chinese backed out of their promises. But according to Financial Times, Beijing accused the Trump team of moving the goal posts, “violating terms struck in December.”
This is really beside the point. American exports to China had been rising before Donald Trump took the oath of office. Raising exports further might give the impression of a “win” — and maybe that’s all this president wants — but it leaves the really serious Chinese transgressions unaddressed.
A lower trade deficit (we had one during the Great Recession!) and tariffs won’t cause a revival of the “great” America that Trump remembers from the 1950s. It will cost jobs — and worse when the economy turns down.
Meanwhile, as Nobel laureate economist Joseph Stiglitz wrote last year, “Trump’s actions will only strengthen Chinese leaders’ resolve to boost innovation and achieve technological supremacy, as they realize that they can’t rely on others, and that the U.S. is actively hostile.”
The breakdown of the post-World War II order was inevitable. Nothing lasts. But that this is being hastened by the nation that created such a largely successful era leaves a bitter taste. And a future to be feared.