Maybe President Trump knows what he’s doing.
If you listen to much of the press, Trump is recklessly getting the United States into a tit-for-tat trade war with China that hurts everyone. But from Trump’s point of view, as he tweeted this morning, the United States has already lost the trade war. Now, it’s time to play catchup.
We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!
— Donald J. Trump (@realDonaldTrump) April 4, 2018
According to the Wall Street Journal, the United States has significant leverage because of the damage Trump’s proposed tariffs could do to China:
Foreign firms in China are among the most productive of all firms there and are a critical conduit into the country for technology.
Those same companies will dial back investment if they believe routing Chinese goods into the U.S. is set to become progressively difficult. And China—struggling under a massive debt load created by its own inefficient state firms—needs their dynamism and know-how.
But companies attracting investment from outside mainland China have still been key job engines over the long run. Crucially, they have done so without the dangerous build-up of debt that’s characterized so much of China’s domestic industry . . .
So while U.S. leverage with China is weaker than a decade ago, there are still good reasons for China to offer concessions. Neither the U.S. or China has yet set a firm deadline for these tariffs to actually take effect—that means the next step is serious horse trading. The question is what the Trump administration will accept.
A few things are perhaps achievable. They include greater purchases of U.S. semiconductors by Beijing—a move reportedly under discussion; much looser joint venture or foreign ownership requirements, particularly in sectors like finance and health care where additional capital is sorely needed; and higher Chinese payments for U.S. intellectual property.
The article goes on to say we can’t “rapidly” scale down our trade deficit with China. But serious progress in combating China’s egregiously unfair trade practices seems to be on the way.