Trump’s trade stance benefiting China
President’s attempt to make US strong through tariffs may backfire
Gary Cohn had one of the toughest jobs in Washington: restraining an impulsive President from waging a trade war he’s been itching to fight.
Now that Cohn is leaving as director of Trump’s National Economic Council, the way is clear for the President to slap hefty tariffs on steel and aluminium imports from around the world.
Trump also has a freer hand to punish China for its alleged theft of intellectual property.
The US is weighing restrictions on Chinese investments and tariffs on a broad range of Chinese imports, people familiar with the matter told Bloomberg,
Trump and the nationalists who have his ear, such as Commerce Secretary Wilbur Ross and trade adviser Peter Navarro, have a point. The US steel and aluminium industries really have been devastated by unfair Chinese competition. China has begun closing some of its steel mills under international pressure, but its production capacity remains twice as high as it was in 2006. The pattern with aluminium is similar.
Trump and his advisers are also correct that economic strength is a matter of national security — and that right now China plays that game much more effectively than the US does.
China routinely forces foreign companies to turn over their intellectual property — the crown jewels of any corporation — as the price for doing business in the country.
The Made in China 2025 project aims to develop domestic sources for a wide array of advanced technologies, something that would reduce its dependence on potential adversaries such as the US and Japan.
The 2018 National Defence Strategy document prepared by the Pentagon accuses China and Russia of “undermining the international order from within”.
It’s important to credit Trump on these points, because a lot of commentators have dismissed his promise of metals tariffs as nothing more than a play for votes or an eruption of machismo.
They may be that, but they’re not only that. None other than Michael Froman, who was President Obama’s chief trade negotiator and is no friend of Trump’s, said on February 5: “It is in our national interest to have a strong steel and aluminium industry domestically.”
The tragedy is that Trump has made the US, rather than China, the focus of the world’s opprobrium.
Citing national security as a justification for the metals tariffs will give other countries the excuse to do the same, tearing a hole in the delicate web of trade agreements the US spent decades spinning. And applying the tariffs to all countries, as he has threatened to do, weakens the united front of American trading partners that’s needed to confront China and get it to change its behaviour.
“This will be seen as the latest, and one of the more significant, signals that the US under Trump is not a reliable economic partner,” says Roland Rajah at the Lowy Institute, a Sydneybased think-tank.
As critics are fond of pointing out, China is the 11th-biggest seller of steel to the US and comes in fourth in selling America aluminium.
Far more affected will be Canada, the No 1 exporter to the US of both metals.
Suddenly we’re discussing possible trade wars between the US and some of its most reliable allies. European Commission President JeanClaude Juncker adopted some of Trump’s bravado in Germany this month. “We will now impose tariffs on motorcycles, Harley-Davidson, on blue jeans, Levi’s, on bourbon. We can also do stupid. We also have to be this stupid,” the European Union’s highest-ranking official said.
Trump, of course, fired back on Twitter that if Europe retaliated, the US would counter-retaliate with tariffs on vehicle imports. On February 5, Trump tweeted that he might exempt Canada and Mexico if they sign a “new & fair” North American Free Trade Agreement. That, unfortunately, undercut his argument that the tariffs were necessary for national security.
The spectacle of Western leaders attempting to out-stupid each other plays into China’s hands and may explain why its officials have stayed relatively quiet.
As Napoleon is supposed to have said: Never interrupt an opponent who is making a wrong decision.
The reason Trump keeps attacking
This will be seen as the latest, and one of the more significant, signals that the US under Trump is not a reliable economic partner.
Roland Rajah, Lowy Institute
allies over trade is that despite the best efforts of globalist advisers such as Cohn, he continues to regard trade with a Game of Thrones mindset, as a war in which one side must lose.
Exports are good and imports are