Donald Trump’s trade delegation came home empty-handed from China. The Chinese called the talks “candid and efficient“; the White House called them “frank.” That’s probably code for The U.S. made silly demands, and China told us to jump in a creek:
The US demanded that China cut the trade deficit the US currently has by at least US$200 billion by the end of 2020. In addition, the US demanded that China halt state subsidies for industries under its “Made in China 2025” plan.
Also, it called on Beijing not to take retaliatory trade measures against Washington [Wendy Wu, “The Next Step? After US-China Trade Talks Fail, Trump and Xi ‘May Need to Get Involved,” South China Morning Post, 2018.05.05].
Three demands, three absurdities.
1. Trade deficits take two to tango. If Trump wants to reduce the trade deficit, he could just as easily turn to his base and tell them to quit buying Chinese goods. Heck, if Trump’s ammosexuals will blow up their Yeti coolers over a misread memo on product discounts (memo to gun nuts: the NRA has declared a cease-fire on Yeti), surely Trump could just yell, “F— China!” and his legions would all walk out of Walmart.
2. China’s Made in China 2025 program is the kind of manufacturing upgrade plan you’d expect any sensible nation to make in its own self-interest:
Made in China 2025 is a blueprint for Beijing’s plan to transform the country into a hi-tech powerhouse that dominates advanced industries like robotics, advanced information technology, aviation, and new energy vehicles. The ambition makes sense within the context of China’s development trajectory: countries typically aim to transition away from labor-intensive industries and climb the value-added chain as wages rise, lest they fall into the so-called “middle-income trap.” Chinese policymakers have diligently studied the German concept “Industry 4.0,” which shows how advanced technology like wireless sensors and robotics, when combined with the internet, can yield significant gains in productivity, efficiency, and precision [Adam Segal, “Why Does Everyone Hate Made in China 2025?” Council on Foreign Relations, 2018.03.28].
Putting national self-interest first in the cornerstone of the faint attempts of Trump’s speechwriters to turn Trump’s selfish babblings into coherent foreign policy. Is China’s plan to make more stuff at home any different from Trump’s professed desire to make more stuff in America? If we demand that China drop its Made in China 2025 plan, are we willing to reciprocate by dropping our “Made in America” pretenses?
3. Don’t tariff us; we’ll tariff you. Trump thinks he can ask China, with a straight face, not to retaliate against us for imposing tariffs on their steel and aluminum? Why would any nation not retaliate against such an attack? What does China get from not responding, other than hosed?
Maybe the Chinese could be persuaded to take the economic high ground and adopt this smart anti-tariff view from the Bush Institute’s Matthew Rooney that we can only wish someone would get through Trump’s thick skull:
Tariffs are always a drag on growth because they raise prices and reduce purchasing power. Ironically, import tariffs on industrial commodities like steel and aluminum also act as a tax on exports, increasing the cost of American goods and reducing our competitiveness in international markets. This is true even though our imports of steel and aluminum are a relatively small share of our consumption. Domestic producers will take advantage of the increased price of imports to raise their own prices. And, it is true even if the threatened tariffs ultimately don’t take effect because the uncertainty is already causing producers to rethink their production and marketing plans. As a result, unless the threat of tariffs succeeds in forcing a breakthrough change in Chinese behavior, we can expect job creation, and the United States and global economic growth to continue to weaken over the coming months [Matthew Rooney, “Quick Takes: Tariffs and a China Trade Deal,” George W. Bush Presidential Center, 2018.05.01].
Under Bush, Obama, and Clinton, America was the smart, sensible country who could be counted on to keep the global economy in working order. Under Trump, we are now the anti-globalist bullies making stupid, counter-productive demands. We’re practicing the art of the squeal, not the art of the deal. That’s why Steve Mnuchin came home with nothing to say and nothing to show.