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Money / Politics

Trade with China in Flux, But Sky is Not Falling

China

Everyone on Monday was in a frenzy, funk or fit of fear.  The stock market dropped 617 points. Pundits on right, left and center (fewer every day) predicted the sky was falling.  A trade war with China will end the world as we know it.  Truth is somewhat different, but then truth does not sell papers.

Here is the truth – in ten facts. 

First, the US trade balance with China, that is, the balance of imports to exports in billions – is out of whack.  By way of example, from 2012 to 2018, it bounced from $315 to $375 billion dollars; they were taking that much more from us.  Not close since 1985, the imbalance rose to $419 billion in 2018 – in favor of China.  We sold them $120 billion, while they sold us $539 billion.  So, the President has said “enough.”  He is right – we are off balance.

Second, the Chinese have made massive investments globally, in the famous “Belt and Road” investment initiative – seeding physical and cyber infrastructure across Asia, Africa, and even Europe.  Aims are mixed, but plainly to dominate.  Many suspect – with reason – China’s motives are not purely economic, but political.  Trump is right, political caution is in order. 

Third, China has violated many international norms – some of which helped generate that massive trade imbalance, from gaming the World Trade Organization to currency manipulation (watch just ahead), treating Chinese capital on foreign soil as foreign production, forcing disgorgement of intellectual property, closing markets to some US services, putting tariffs on goods sold in open markets, penetrating US companies and government with cyber- attacks (including OPM), and making law enforcement difficult.  So, a fair player? Maybe not.

Fourth, while some argue the point, their military activities have been unprecedented, provocative and unlawful – endangering global security.  Their activities in space – including anti-satellite weapons – are in violation of law.  On earth, they modernize massive weapons systems, building and militarizing artificial islands in the South China Sea, threatening US and international shipping, work to militarize foreign infrastructure, and continue to threaten Taiwan, occasionally other actors.  They too have carrot and stick, and stick is getting bigger. 

Fifth, they are egregious offenders of human rights, with a one-child policy that killed tens of millions of children annually via infanticide and late abortions, usually girls.  They execute more than 2,400 citizens annually, many for political reasons.  They have no appeal, and sometimes just swallow people, like the former head of Interpol, who has vanished.  So, rights violations flash.

Sixth, on other fronts, Trump – like no one before him – has said call a spade a spade.  He has called China out for failure to enforce sanctions on North Korea and treatment of their people, much as Reagan called out predecessors of Gorbachev – although with less directness.  China has at least a million citizens trapped in “reeducation camps” in the Northwest, bleaching out their Muslim religious faith; they also persecute Christians.

Seventh, realism is in order on what Trump has done.  What is he asking?  He has put 25 percent tariffs on goods Americans can buy from more reasonable partners, because China has not been willing to place agreed provisions in law.  Trump does not want a Communist press release.  What is that worth?  He wants a legally enforceable, structural change in the trade.  Reasonable?  Yes.

Eighth, is the world coming to an end with China imposing tariffs (read: a tax) on $60 billion on US goods – after Trump put tariffs on $200 billion in Chinese goods?  No, this is transactional.  This is negotiation by tariff, each taking measure of the other’s seriousness.  More to the point, the Chinese had to impose something to save face, even if later codify.

Ninth, the President knows other issues are at stake – one is ending America’s fentanyl crisis, as all the fentanyl comes from China.  He has made the point repeatedly, and we might see some mention in the final deal.  Another big issue is primacy on 5-G new communications grid, but that is a longer-term issue.

So, what is the endgame?  The sky is not falling.  A deal might not happen, and if not, life goes on.  We might even see internal unrest in China.  America’s economy is resilient. The likeliest endgame is simpler, more obvious.  What is wanted by Trump is a step forward that is permanent, no more backsliding.  Wanted by China are adjustments that make trade stable, growth sustained.  Both are more likely to get what they want than not.

Do not expect media to give Trump credit for triggering intergenerational rebalancing, better trade and security terms.  That will come when Americans see, after all, good things do take time – and the President’s resolve paid off.  Until then, expect to hear the sky is falling.  It sells papers, right?

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Frank S.

Trump is right and courageous to finally stand up to and challenge China. He’s doing what Clinton, Bush 43 and Obama didn’t have the intestinal fortitude to do…shame on them. Of course all those “smart” people in State deserve some of the credit, thinking we could make China more like us over time. Now I see Biden making a fool of himself (and he’s currently the Dems front runner?). As this trade war continues, and in all probability escalates, let’s see how long it takes the rest of the Dems to start attacking Trump in his handling of this issue. So far most are agreeing with Trump’s standing up to China. Good on them for that (for now). China still intends to be the world leader economically, politically and militarily by 2049 (the 100th anniversary of the Communist take-over). Let’s see if we can slow them down now. It is… Read more »

PaulE

The media continues to do their vital part to try and undermine support for both capitalism and the President by parading the usual cast of former Obama, Clinton and Bush era officials and assorted Never Trumpers before the cameras to attempt to instill fear and doubt in the American public. Fear and doubt that every action the President takes to correct the failed and lopsided policies of past administrations are somehow all doomed to fail and result in the end of the world as we know it. America’s version of Project Fear, as the Democrats, the Never Trumpers and the Chamber of Commerce call it, is alive and well and being spoon fed to the public on a daily basis. The only question is whether the American people, as a whole, are smart enough to see past the obvious, ongoing disinformation campaign being played out by this cabal. To stop… Read more »

TomB

President Trump is right to take on China. At present our economic leverage is far superior to theirs. Last year our exports (goods and services) represented 0.9% of our GDP, or $180 billion. In contrast, China’s exports to us totaled $559 billion or 4.6% of their economy. China needs western trade, but they are no longer a 3rd World country, their piracy of intellectual property and unequal use of tariffs needs to stop.

Stephem McLean

As I write, I notice that the lunatic fringe of AMAC isn’t here screaming about George Soros (though I truly believe him to be a less than forthright person with regard to the USA). The ChiComs make Donald Trump – branded by the Left as a rude, crude, etc., etc., fake leader of the USA – look like a simple school yard bully. The trade imbalance with China has caused jobs to leave our country (I don’t know WHY the unions haven’t made a stink about this) and increased their wealth so that their evil way of doing business and governing has spread world-wide. The sky isn’t falling. It’ll be a bumpy road for awhile. China has been used to administrations here backing down every time their dragon roars. DJT has said “enough”. The worse that can happen is that “dollar stores” will become “two-dollar stores”.

Wayne

It is too bad that there are some people that will sell out America over their profits. Go Trump Go 2020!

Rick J.

Good for President Trump for standing up to the Chinese. The Chinese are playing the long game. World economic and political domination are the prize. This is the first time a western leader has stood up to challenge them. Yes, there will be some short term economic discomfort for most consumers and suppliers, but the results will be of great benefit to all. The nation will pay a small price now or a much larger price in the future.

Chuck

China has intimidated the U.S. long enough. It’s time to get tough and regain our sovereignty and exceptionalism. President Trump is the person to do it. He’s not a politician. Something the “Establishment” still cannot comprehend.

Wayne D Peterkin

Excellent article and true. The bottom line is that China has manipulated trade to benefit China and no one else. Since they sell a whole lot more to us than we do to them, these tariffs on their goods are the main weapon in our arsenal to reach a fair trade deal with them, and fair trade is far more important than free trade. Ideally we achieve both free and fair trade, but China will resist. They steal not only industrial secrets but military secrets as well envisioning themselves as the world’s dominant power within a very short time. President Trump is doing what previous administrations should have done for decades, take China to task and level the trade playing field. The short-term pain for American exporters will hopefully bring long-term gain for us all, but time will tell. In the meantime, there is no good alternative.

Robert N.

The panic of some over this rebalancing of our trade with China to make it equitable is unfounded. This is good for the following reasons: 1) I am tired of not even having an option when I go to the store to buy American and help my neighbors keep their jobs. I have lost my freedom to decide because of globalists and those who love money more than country and politicians bought off by foreign entities. This will give U.S. business a chance to fill in the gap… whether they will or not, I don’t know. However, I know that if they don’t someone will. 2) No American has to pay tariffs… just don’t buy Chinese products. The same is true about tomatoes from Mexico… don’t buy Mexican tomatoes… some of the American famers will move to tomatoes or I will grow my own. The founding fathers and mothers had… Read more »

Brenda Blunt

Perhaps this will force American companies to make the item here in USA and employ Americans. Perhap using American intelligence, etc. Perhaps this will build up America again!

The OLD Warhorse

WOW, this is easy enough for even the most hard-core Liberal to understand. Maybe even a few Republicrat Never-Trumpers. BUT, they would never read it; it doesn’t fit their agenda. Thank you for an excellent, easy to understand article.

A wise observer

The writer also failed to mention that as foreign (China) goods become more expensive, it opens an opportunity for U.S. manufacturers to get back into the game. A stronger manufacturing sector is good for America. When WWII came along, the US had awesome manufacturing capacity that allowed us to supply the British with tanks, guns, airplanes, etc. and, later, to take on the Japanese and the Germans both. But since we have messed around for 75 years, we have allowed almost all manufacturing of leather shoes to be done overseas (Allen Edmonds is still made in USA), production of lead for bullets and batteries is non-domestic now, and many, many, other things (proof: just look at the country of origin labels on 90% of the stuff in Walmart). So, if the trade dispute carries on long enough, factories will open (or re-open), and we will achieve a higher level of… Read more »

Rose

Maybe companies will start making items marked made in USA again- put our people to work-I prefer things made here!

RAK

Excellent breakdown of ten obvious facts.

Bob

I’m glad that Trump is looking to do the right thing for America. We have been getting screwed for years by China and others, and no one has had the nerve to stand up to them. It may hurt some for awhile but it has to be done. America has to do what will benefit America, not some other country. Politicians need to realize this. Politicians have been elected to make things better for Americans, not foreigners. This should have been done long ago.

Darryl

We should dump China as such a large supplier of goods for the US. We should keep taking back more of the manufacturing for our workforce, economy and country. Why did we ever agree to do such a large amount of business with a Communist country and help to make an adversary a wealthy nation?

Chilipup17

Thanks great article!

Greg Russell

Typically, there is some measure of pain involved when age old norms are removed and replaced with a new paradigm. China clearly has had no resistance regarding trade with the U.S., since the established, entrenched political families weve had stinking up our Oval Office in recent memory didnt have the will, or the desire to do the hard work that this President is doing. There are no guarantees and no absolutes in global politics, but there`s a very good chance that the playing field may finally be leveled due to the outsiders eye, and the businessman pedigree of President Trump.

Thomas H.

The (d)s are SO predictable! Although most thought me fanatical, I made several posts (starting back when Trump took the oath of office) that the (d)s would try to hurt Trump by attempting to crash our economy, doing this by: (1) Somehow having the “apolitical” Federal Reserve raise interest rates several times in succession, making the interest on our debt quickly unpayable (during O’s reign, the FR strangely lowered rates to an unheard-of zero and kept them there, even while the MSM regularly predicted a blossoming economy) and (2) Having their “unbiased” media regularly predict a coming economic catastrophe – stopping (for now) just short of encouraging a run on the banks. Both (1) and (2) are now well on their way, while having this same media blame Trump and the (R)s for this crash (#3) will be the icing on the cake.

Ed D

A trade deficit is not necessarily a bad thing. A trade deficit is just a bookkeeping entry, not a debt that has to be paid. Countries don’t trade — people do. Americans are no more harmed by the trade deficit with China than you are by your trade deficit with Kroger. Trade deficit are not really driven by consumer behavior… It’s true that many Americans prefer German cars and French wines — and cheap electronics and T-shirts made in China — but trade deficits mostly are the result of several other causes: macroeconomic factors such as tax policies and savings rates, the strength of a country’s currency, and, most important, its attractiveness to investors. …Far from being victimized by such trade, Americans are enriched by it.