In his trade war with China, Trump has the right problem but the wrong solution

With all the grace and subtlety of a pay-per-view wrestling match, the Trump trade war has finally begun. In one corner, we have the president of the United States. In the other, we have president Xi Jinping and the Communist Party of the People’s Republic of China, that newfound bastion of free trade. This isn’t the show that most people signed up for, but it’s the show we’re going to get.

This is a dangerous game, and there has been no shortage of criticism of Donald Trump for imposing trade restrictions on China. But to his credit, the president’s motives are not bad ones.

Be it a burglar stealing something from your home or a government deciding that your intellectual property no longer belongs to you or your shareholders, most people would call those activities “theft”, and agree that some form of retaliation is acceptable. The Chinese have been bad actors in this area for a long time, and it’s not unreasonable that the United States should respond. In fact, the US is probably the only country on Earth which can afford to challenge the Chinese government on some of its more egregious practices.

This fits a broader pattern for the president, who has made a habit of finding and acting on instances of unfairness that rile the American voter. It’s unfair that wealthy people get to buy access to politicians. It’s unfair that our veterans come home to shoddy care. It’s unfair that the rest of the Western world gets to freeride on military protection underwritten by the American taxpayer. It’s unfair that the Chinese are making themselves wealthy and powerful by stealing the hard work of American companies.

In each instance, Trump was not incorrect in his diagnosis that these are serious problems. Too often, irritation or flat-out hostility towards the man crowds out the good sense occasionally to be found in his core message. But, not for the first time, Trump has found the wrong solution to the right problem.

The events of the past few weeks are proof enough that this trade war could easily get out of hand. In early March, the Trump administration announced steel and aluminium tariffs which were primarily aimed at China, the world’s largest exporter of steel, accused of illegally subsidising its producers. On Monday last week, the Chinese responded with tariffs of their own, worth roughly $3 billion. Not to be outdone, the US announced another $50 billion of tariffs against Chinese products on Tuesday, a figure judged to be equal to the damage done to US companies by the Chinese government’s practice of stealing technology from them.

The next day, the Chinese announced an additional $50 billion of tariffs against American-made products, apparently and nefariously designed to hit constituencies deemed to be supportive of Trump. On Friday, the president ordered the United States trade representative to find another $100 billion worth of tariffs to impose on the Chinese.

The Chinese have behaved badly, that’s for sure, and remediation is necessary. But nobody wins a trade war, and imposing tariffs of this magnitude guarantees a kidney punch to the American agricultural and industrial heartland, which can ill-afford it. The firms most impacted by unfair Chinese trade practices sit in Silicon Valley, and they’re unlikely to be seriously hurt in this fight.

Traditional trade remedies provide few elegant solutions to this particular problem. Tariffs on basic goods are tempting to implement because they’re easy to put into force, and make for splashy headlines. Unfortunately, short of enforcing the same sort of investment restrictions which exist in China, there are few options on the table that don’t end up hurting other sectors, and none at all which avoid hurting consumers.

It is a simple fact of trade wars that they always fail to achieve their primary aim, and that the poorest are most hurt by protectionist measures. Far from “making America great again”, these tariffs guarantee that the dollars of consumers won’t go as far – and when you’re not starting off with a lot of dollars in your pocket, that’s a problem. This real, human cost is what gets lost in jargon. Trump is very good at articulating the human cost of globalisation, and so far, no one on the pro-free trade side has found a way to explain why his medicine is worse than the disease itself.

The president should be applauded for attempting to find some blocking mechanism to the economic hegemony which the Chinese are so blatantly attempting to construct; but there should also be no doubt that this is not the right one.

It is a simple fact of trade wars that they always fail to achieve their primary aim, and that the poorest are most hurt by protectionist measures