U.S. and China trade punches
The trade war between the U.S. and China escalated to a new level of hostility as a frustrated President Trump threatened last week to cut off all U.S. business with China. In retaliation for an earlier round of U.S. tariffs, China imposed duties of 5 to 25 percent on $75 billion worth of U.S. goods, including crude oil, automobiles, soybeans, pork, and corn. The Trump administration responded by raising planned tariffs on $300 billion worth of goods—including electronics, clothing, and toys—from 10 to 15 percent, with Trump threatening to hike taxes as high as 30 percent on another list of products. An enraged Trump also tweeted a demand that alarmed corporate leaders and sent markets temporarily plunging. “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing our companies HOME and making your products in the USA,” he said on Twitter. “We don’t need China and, frankly, would be far better off without them.”
Trump also attacked Federal Reserve Chairman Jerome Powell for not slashing interest rates to bolster the economy. “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” Trump asked, referring to Chinese President Xi Jinping. Trump later tried to dial down the rhetoric, admitting to having “second thoughts” about the trade war and praising Xi as a “great leader.” Trump also claimed Chinese officials had called about resuming talks, eager to reach a trade deal. Beijing, however, denied making any such calls. Asked about his mixed messages, Trump was defiant. “Sorry, it’s the way I negotiate,” he told reporters at the G-7 summit. “It’s done very well for me over the years.”
What the editorials said
Trump “has no clue how to deliver a trade deal,” said USA Today. He keeps lurching between hard-line and conciliatory stances. Markets panicked after Trump “ordered” American companies to pull out of China—an authoritarian threat that would have made Republicans’ heads explode if it had come from, say, President Obama. But a few days later, the president was playing up the possibility of a deal. How are businesses supposed to make plans in this environment? Beijing might decide to simply wait Trump out instead of trying to negotiate with such an erratic partner. After all, “Trump faces an election next year; Chinese leaders do not.”
Trump “has good cause to want to confront China over its cheating and unfair trade practices,” said the National Review. But he needs to fight smarter, not harder. Tariffs are a “blunt instrument that hurt us as well as China, and invite ready retaliation from the Chinese.” The tariffs are costing the average American hundreds of dollars a year. Trump should find other ways to pressure Beijing, such as limiting Chinese students’ access to our universities and forging free trade deals with our allies.
What the columnists said
Trump’s attack on the Fed chair was “stunning even for him,” said David Graham in TheAtlantic.com. So was his bizarre “order” to private companies to stop doing business with China. Sensing that he’s losing this trade war, Trump clearly longs to be like his rival Xi Jinping—“an authoritarian presiding over a command economy.” Trump has already shown an appetite for central planning, spending $16 billion on subsidies to appease farmers hurt by his trade war. Ironically, Trump is sending taxpayers’ dollars to farm country even as he lambastes his Democratic opponents “as a bunch of socialists.”
Despite the big bailout, farmers are not happy, said Greg Sargent in The Washington Post. Billions in aid can’t make up for effectively closing off the world’s biggest export market. Farm bankruptcies are rising, while sales of soybeans, pork, and wheat are plummeting. Trump keeps insisting that “farmers are starting to do great again.” But they’re getting tired of his gaslighting, and loudly booed Agriculture Secretary Sonny Perdue at a recent town hall in Minnesota. “We’re not starting to do great again,” Brian Thalmann, the president of the Minnesota Corn Growers Association, told Perdue.
Admittedly, Trump’s messaging is flawed, said Myron Magnet in the New York Post. But for years, China has forced American companies to turn over proprietary technology for the right to do business there, knowledge Beijing is using to achieve superpower status. Trump needs to better explain that sacrifices are necessary because “America’s safety and geostrategic power are at stake.” But economically divorcing China is more than just a sacrifice, said Peter Goodman in The New York Times. “For better or worse, the United States and China have been fused for two decades.” Our symbiotic relationship accounts for 40 percent of the world’s economic output. Any disruption will ripple far and wide. Trump can fight with China or grow the economy. “He cannot do both.”
In theory, Trump could legally force American companies to divest from China, said David Fickling in Bloomberg.com. The president has wide-ranging powers under the 1977 International Emergency Economic Powers Act, which allows him to block further investments in China by declaring it a security threat. But our investment in China is effectively “too big to fail.” U.S. businesses have nearly $200 billion invested in China, value that would be destroyed in a “chaotic fire-sale” that would surely trigger a recession. American companies increasingly rely on China, said Jim Zarroli in NPR.org. Firms like Starbucks, Nike, and Boeing “make a large part of their profits” serving China’s growing middle class, which is now bigger than the entire U.S. population. KFC sells more chicken in China than in the U.S., for example, and General Motors more automobiles. Apple not only makes most of its iPhones in China, but also is banking on it for sales growth. If the trade war becomes even more punitive, “some companies could end up as casualties.”
Cover illustration by Fred Harper.
Cover photos from Getty (2), Reuters ■