It’s really too soon to say for sure, but following an explosion of back-seat driving Friday and Saturday about the outbreak of trade hostilities between President Trump and the Chinese, things are beginning to look up.
My American Spectator column this morning took on just one of those back-seat driving episodes, as fellow columnist Ross Kaminsky went ballistic over Trump’s tweets Friday laying into both China and Fed chairman Jerome Powell, who refuses to lower interest rates despite months of the president begging him to do so.
Kaminsky lost it over those two tweets, declaring that Friday was a “particularly bad day for the United States,” and characterized Trump as “panicky.”
By Sunday, however, Trump was announcing a deal in principle to sell several billion dollars’ worth of agricultural products, specifically corn and soybeans, to Japan and thus reduce slack produced by Chinese tariffs on American farm goods.
We commonly need reminders, it seems, that Trump doesn’t operate like a politician. He’s a negotiator, and he doesn’t care about diplomatic or geopolitical niceties.
He knows he’s going to be regarded as a bully or a buffoon by both the U.S. and international media, and he doesn’t care. He also knows that using unconventional language on Twitter is an attention-getter in the way the usual soft language of international trade and diplomacy is not.
So when Trump “orders” American companies to get their supply chains out of China, we come back to the now-familiar refrain that he needs to be taken seriously rather than literally. Yes, there is an interpretation of what Trump said which is literally operative, in that the federal International Emergency Economic Powers Act would give him power to impose consequences on companies not heeding his statement. But that’s not what he was getting at.
As Andy Puzder, who was a nominee for Labor Secretary at the beginning of the Trump administration, wrote at Fox News over the weekend, what the president was doing was calling attention to something which is already happening — namely, the flight of American capital and supply-chain operations out of China, and encouraging it to accelerate as rapidly as possible. Quoting Puzder…
Companies, including some of the largest American retailers, are starting to flee China in droves. HP, Dell, Microsoft, Amazon and other American electronics giants are shifting production out of China. Even the crown jewel of American production in China, Apple, is reportedly looking for a better place to make its iPhones.
The pressure Trump has imposed on China is working. Chinese manufacturing companies are reportedly getting “desperate” as the communist country experiences its first real economic pain in decades. Meanwhile, the American economy and jobs market remain strong. When Trump announced on Twitter that he was “ordering” companies to “start looking for an alternative to China,” he was encouraging a process that had already begun on the ground.
Think of this in terms of negotiation tactics. Sure, Trump’s language might be more bombastic than most would be comfortable with. But he’s aiming to make his interlocutor, which is not the American people in this case but the Chinese Communist Party, as uncomfortable as he can.
And we all know that American companies have been abused, and badly, in their dealings with China. To avail oneself of the Chinese market is to essentially agree to have your intellectual property stolen, and the Chinese have engaged in practically every predatory trade policy they could over the last 30 years. That’s why as Puzder notes, many American companies are looking to get clear of China — the experience hasn’t been what they’d hoped.
Read the whole thing here.
It didn’t take long to prove me right, as this morning – with Chinese markets in fee fall and economic chaos beginning to descend – they more or less sued for peace.
In response, Chinese Vice Premier Liu He told a state-controlled newspaper on Monday that “China is willing to resolve its trade dispute with the United States through calm negotiations and resolutely opposes the escalation of the conflict,” Reuters first reported, citing a transcript of his remarks provided by the Chinese government. Liu is China’s top trade negotiator.
Speaking at a technology conference in China, Liu added: “We believe that the escalation of the trade war is not beneficial for China, the United States, nor to the interests of the people of the world.”
“We welcome enterprises from all over the world, including the United States, to invest and operate in China,” Liu said. “We will continue to create a good investment environment, protect intellectual property rights, promote the development of smart intelligent industries with our market open, resolutely oppose technological blockades and protectionism, and strive to protect the completeness of the supply chain.”
China has lost three million jobs since the beginning of this trade war. The U.S. is gaining jobs.
Which isn’t to say that a trade war is a good thing. Nobody has made that case. The question is what’s worse – continuing to allow the Chinese to steal $100 billion of American intellectual property per year while running a predatory trade imbalance with us, and dumping goods on U.S. markets in an attempt to drive domestic producers out of business, or spiking tariffs to punish that behavior?
Most of the American political establishment seems to think the latter is worse. Trump differs. So far, it looks like he might be right.
Again – Trump’s statements and actions are negotiating tactics. They’re not the sum of American policy. He’s not imposing tariffs on China as an end in themselves, he’s doing so as a means toward the end of making them a better trading partner with markets more open to American goods and a firm commitment to respecting the rule of law. Everything Liu said in that statement was an admission our grievances against their trade practices are real, despite the fact he couched the admission in a denial. “We will continue” is weasel-word for “we recognize what you want from us, and we can’t afford to continue denying it to you.”
Fox News had a good interview with Gordon Chang, an expert on all things China, this morning that’s worth a watch…
Chang is right that the Chinese won’t stick to any deal they make with us. They’ll immediately resort to cheating, and they’ll do everything they can do influence the results of U.S. elections next year in order to produce a Congress and a White House more receptive to the status quo ante. If you think the Chinese wouldn’t be ecstatic to see America embrace the economic suicide of the Green New Deal or other climate change hysteria that cedes energy and manufacturing superiority to their state-owned companies, you’re not paying attention.
But what Trump has apparently done is to force China to back away from the current fight and give him a political and economic victory in the short term. They’ll go dark and attempt to win a different way with the 2020 elections as the prize. If Trump is re-elected, China might have no choice but to accept a new reality in which they lose a significant amount of world market share where manufacturing is concerned and the internal political and economic issues they’ve papered over with that massive trade surplus will no longer wait.
It’s a shame the entire country doesn’t recognize the dynamic here, though this is changing. The Atlantic, of all places, ran a piece last week noting how important it is to Western democracy that Trump win this fight, and yet the screaming about the trade war continues.