President Donald Trump enjoys bipartisan support for his tough posture toward China but Democrats and farm-state Republicans could join business leaders opposing his tariffs if he fails to persuade President Xi Jinping to agree to serious negotiations when they meet at the June 28-29 G-20 Summit.
That’s foolish. Americans should be prepared for Trump’s tariffs to become permanent and to disengage from China, find new markets for agricultural commodities, and learn to make or purchase elsewhere those things that we import from China.
At the center of the impasse is Beijing’s refusal to change its laws to lock in commitments to end forced technology transfers by foreign companies investing in China, outright theft of American patents and trade secrets, export subsidies, and industrial policies that target U.S. competitive advantages.
World Trade Organization rules are premised on the principle that trade should be based on comparative advantage to raise incomes and wages among all nations. It requires all governments—including China—to conform their domestic laws to effect those commitments.
China says it won’t change its laws as a matter of sovereignty and honor. Nonsense—we are engaged in these negotiations because it did not keep its word to change its laws and abide by commitments it made when it signed onto the WTO in 2001.
Equally disingenuous is the Chinese offer to lock in commitments via regulatory changes—directives issued by its central government. Beijing bears the burden of its history on that score—for example, its broken commitments to rein in subsidies for high-tech firms.
In Xi’s mind, China is riding the great arc of history to a place where it makes the rules, and supplicants like the Europeans, Americans and Asian neighbors adhere to its vision. China — the omniscient, omnipresent and omnipotent state — dominates, and the leader of the Chinese Communist Party sits atop a throne of empire.
China doesn’t play by the rules of other civilized nations—on trade, on the sanctity of international waters or on its obligation to restrain rogue states like North Korea.
It’s time to label China for what it is—a renegade state.
China doesn’t send terrorists to explode our buildings but instead dispatches a host of pirates to steal our technology, jobs and prosperity, and to sap our strength to one day dictate the terms of our surrender.
Honorable people understand if they lie, intelligent folks will stop taking them at their word but in Xi’s kleptocracy, America is led by fools—he absolutely underestimates U.S. chief negotiator Robert Lighthizer.
Trump faces a lot of pressure to come up with a deal—Democrats will hammer him in the 2020 election and appeal to farmers hit by retaliation and low-income workers bearing higher prices at Walmart
for backpacks, baseball mitts and beer.
Tall tales abound—Moody’s Analytics sees the threat of another recession—but Wells Fargo estimates the most that the additional tariffs levied this month on $200 billion in imports from China could raise the consumer price index is 0.15%.
However, that is if the Chinese yuan
does not fall substantially, as it did with previous tariffs, Chinese producers do not absorb a portion of the tariffs, as many did with previous levies, and new producers do not emerge elsewhere in Asia, as they are eager to do if U.S. businesses believe the tariffs are more or less permanent.
The bottom line is that prices are likely to go up no more than 0.1% thanks to recent tariffs and if the president imposes tariffs on the remaining $290 in Chinese imports, that figure jumps to about 0.35%.
Overall, that translates into price increases the equivalent of an 8 to 27 cent increase in the price of gasoline but thinly spread across all prices. It is hard to believe, as many economists and traders seem to believe, that sort of increase in prices could take the economy tanking into a recession.
The real danger in all this is that Trump settles for half a deal—promises but no enforceable commitments. The theft of America’s family jewels—leadership in artificial intelligence—would be a far greater loss than some soybean exports or paying a bit more for consumer items whose production could be moved to Vietnam or even Kansas.