Was Trump Right on the China Trade War and the Subsequent Deal? No!
By Mani Subramani
The trade deal with China is definitely a step in the right direction for the Trump administration. But only after taking several steps backwards! Like a broken clock Donald Trump has been complaining about trade imbalances since the 1980s, first with Japan and now with China. Global trade with China has been growing steadily. In a recent study, The Economic Policy Institute reported little over a 4 fold increase in imports from China (120B-540B) and a greater than a 6 fold increase in exports to China (19B-120B).
The Trump administration needs to ask itself if it’s willing to give up 120B in exports to Make America Great Again? Like the U.S. did in 2001? The answer is clearly NO.
The Phase-1 Trade Deal will have the Chinese buy more soy and hogs from U.S. farmers but the agreement keeps the level of export the same as before. Due to the African flu and the following hog shortage in China, there was a pre-existing demand for hogs without the Trade Deal.
Now President Trump claims that tariffs are great for the treasury and makes false claims that it is paid for by the Chinese entirely. Wrong on both counts. Despite the tariffs and expanding U.S. economy, the deficit for 2020 is on track to hit a trillion again. A recent Business week study finds that of 25% tariffs on $250B about $3B/month is paid by consumers and another $1.4B/month in costs related to lost efficiency. In other words, a vast majority of the tariffs are borne by consumers and importers.
Tariffs are a blunt un-directed weapon which when used are full of unintended consequences. As pointed out in a study by the Tax Foundation, more workers in other industries dependent on steel lost their jobs due to the 2002 Bush Steel tariffs; few were protected. Trump repeated this mistake making the false claim of saving jobs once again and implemented his Steel and Aluminum Tariffs in 2018. The result was a temporary improvement in steel prices followed by a deep slump in prices due to over capacity and severe cutbacks in steel jobs.
In addition to these unintended consequences, the trade deal represents a loss of focus and forgets to address three key areas: Chinese government subsidies create unequal advantages for development and pricing that kill off global competition; intellectual property protection in China is exploitative and should be changed for it to be a mutually beneficial relationship; the trade deal does not specifically prohibit the use of technological advances for military warfare.
U.S. interests would have been better served by steering clear of a trade war and instead focusing the dialogue in China on the three key issues aforementioned. Maybe that is why past presidents weren’t “tariff men”. Guess it’s a lot easier to win elections by blaming trade for lost jobs!
Mani Subramani is a veteran of the semiconductor equipment industry. He enjoys following politics and economics.
This article is part of the monthly Forum Series, where you get eyes on both sides of a hot button issue.
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Was Trump Right on the China Trade War and the Subsequent Deal? Yes!
By Rameysh Ramdas
For decades, China has pursued discriminatory, fraudulent and predatory industrial policies with the U.S. and unfair trade practices—including dumping, discriminatory barriers, steep tariffs, forced technology transfer, over capacity, and intellectual property theft.
U.S. Presidents, both Democratic and Republican, in the past, have only paid lip service to China. It wasn’t until President Trump, who has the spine to confront China, that the U.S. was able to extract concessions and sign the Phase 1 Trade Deal. While the deal may not be perfect or complete, it is a welcome and necessary first step.
China has imposed tariffs three times more than the United States. The U.S. imposes a 2.5% tariff on Chinese cars while China has a 25% tariff. Chin’s “Made in China 2025” plan adversely impacts U.S. manufactures. The cost of China’s blatant intellectual property theft costs United States’ innovators billions of dollars a year and results in job losses.
Democratic Senator Chuck Schumer showered rare praise on the President for standing up to China and imposing tough tariffs and sanctions. Further Senator Schumer said – “Not only do they steal our intellectual property, they keep our good companies out, and say the only way you’re going to be able to sell your American products in China … is if you come to China, make them there, and give us the techniques and intellectual property.”
According to CNN Business, “Chinese theft of American IP currently costs between $225 billion and $600 billion annually to the U.S.” According to a CNBC SFO survey, 1 in 5 U.S. companies said that China stole their intellectual property within the past year. In 2003, China played another dirty trick by using currency manipulation, allowing its currency to artificially fall. Since 2018, China has had a positive trade imbalance of $379 billion with the U.S.
While it may not be fashionable to commend President Trump in California, any right thinking citizen ought to support Trump’s “America First” policies; the policies focus on eliminating laws and regulations that kill jobs and stifle innovation. With the Trade Deal, China agreed to purchase, over the course of the next two years, $200 billion more goods and services from the United States than it purchased in 2017. As Hillary Clinton rightly said, China has “gamed the system for too long” and now Trump deserves credit for taking the first steps with the Trade Deal to level the playing field and ensure that trade is both free and fair.
Rameysh Ramdas, a resident of the SF Bay Area, has a keen interest in Politics and Current Events.
This article is part of the monthly Forum Series, where you get eyes on both sides of a hot button issue.
License for the image used can be found here.
Edited by Assistant Editor, Srishti Prabha.