How Trump, Xi can make America, China poor again
The U.S.- China trade dispute is so much deeper than you think — and so much more dangerous.
If President Donald Trump and President Xi Jinping don’t resolve it soon, we’re going to fracture the globalization system that’s brought the world more peace and prosperity over the last 70 years than at any other time in history. And in its place we’ll get a digital Berlin Wall and a two-internet, twotechnology world: one dominated by China, the other by the U.S.
This will be a much more unstable and less prosperous world. Trump and Xi should drop everything and resolve this crisis before it becomes a runaway train — fueled by populists and nationalists, and amplified by social media, in both countries.
How did we get here? Two things converged: The character of U.S.- China trade changed — it went “deep,” and both Xi and Trump overplayed their hands and freaked each other out.
How did it go “deep”? For the first three decades, U.S.- China trade could be summarized as: America bought T-shirts, tennis shoes and toys from China, and China bought soybeans and Boeing jetliners from America. And as long as that happened, we didn’t care whether the Chinese government was communist, capitalist, authoritarian, libertarian or vegetarian.
But over the last decade, China has become a technology powerhouse. And it unveiled “Made in China 2025,” Xi’s plan to make and sell to the rest of the world the same high technology that America and Europe sell — smartphones, artificial intelligence systems, 5G infrastructure, electric cars and robots.
I welcome China as a competitor in these areas. But these are all what I call “deep technologies” — they literally get embedded into your house, your infrastructure, your factory and your community. They can potentially be used by China to tap into our society for intelligence or malicious purposes.
Another reason we’re having this trade war is that both Xi and Trump have overreached.
American companies increasingly complained that their access to the China market was constricted, while their Chinese competitors gained power inside of China’s protected market, then competed with them globally. Under Xi’s “Made in China 2025” plan, the government would help fund Chinese companies so they could overtake foreign rivals.
Trump called that game and he was right to do it. But he did so in a foolish way.
Trump should have signed the TransPacific Partnership free trade agreement aligning all the major Pacific economies — except China — around U.S. trade values, norms, interests and standards, and lowered thousands of tariffs on American products. Instead, Trump tore up the TPP.
Trump made it America versus China alone.
So now we have less leverage and are involved in a tit-for-tat tariff war — with no allies.
Is there a way out? Trump should postpone the latest 10% tariff on $300 billion in Chinese exports if China walks back its latest blows to American agriculture, and then offer the Chinese what APCO China Chairman Jim McGregor suggests.
“We should say to the Chinese: ‘ You now are our economic equal.’ Give them that dignity,” McGregor said. “And tell them we want to restart these negotiations on the basis of total reciprocity. We should both have the same rules of access to each other’s economies.”
If somebody has a better idea, put it out there, because if both sides don’t find a better way, the world as we’ve known it is going to change. You may not have loved what we had, but you really won’t like what we’ll get.