90 Miles From Tyranny : All of the Reasons Why Trump Can Win a Trade War with China

Tuesday, March 27, 2018

All of the Reasons Why Trump Can Win a Trade War with China

Since President Trump announced his intention to turn up the trade heat on China, the American political and chattering classes have all but declared Beijing the odds-on favorite to win any resulting trade conflict. Leaving aside this establishment’s dreadful prediction record that stretches back at least to the (completely unforeseen) collapse of the Soviet Union, and its clear determination to ridicule Trump’s flip comment about trade wars being easy to win, here’s what’s overlooked in its portrayal of China as ten feet tall in this arena, and rightly confident in its retaliatory capabilities.

First, the idea that China has much more to lose economically than the United States from an upward spiraling of trade barriers rests on much more than the simple fact of its huge bilateral trade surplus (just under $310 billion in 2016, the last year for which both goods and services data are available). For example, if China could so easily withstand a disruption of the economic status quo, then why has it used so many forms of trade predation for so long to maximize its exports and minimize its imports?

Would a country that could take or leave its trade surpluses work so hard to extort or steal its rivals’ intellectual property? Would it pursue industrial policies aimed precisely at creating advantages for so many designated key sectors of its economy over foreign competitors? Would it limit exports of critical commodities like rare earths (essential for electronics and information technology manufacturing) to give its own producers a leg up on rivals press non-Chinese companies to move operations to the PRC? Would it subsidize massive overcapacity in goods like steel and aluminum in order to...
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