How Trump and Xi can both win their trade war

It is impossible to exaggerate what a dangerous cliff the U.S. and China are perched on today.

If the current trade dispute tips over into a full-blown economic war the world as we’ve known it for the last four decades is going to be replaced with something much uglier, less prosperous, less stable and less able to meet global challenges, like climate change and cybercrime, that are barreling down on us.

We have a juvenile, unstable U.S. president actually enacting trade policy via Twitter — ignoring the advice of his experts — and we have a pressured Chinese president who is afraid to appear to be kowtowing to any trade demands from the United States for fear that his domestic rivals will denounce him as weak and that pro-democracy demonstrators in Hong Kong will be emboldened by his weakness.

So each man is trying to intimidate the other into submission by showing who has the biggest tariff, and this is whipsawing markets and making it impossible for investors to plan long term.

We need a cease-fire now — and if no one else is going to propose the terms, I will.

President Donald Trump should say to President Xi Jinping: “For the next six months, we’ll suspend all the tariffs that we’ve imposed. And in those six months we expect you to order from the top down an end to your worst trade abuses — and you know which ones we’re talking about: stealing intellectual property, forcing technology transfers, restricting access, etc. You don’t have to announce anything or put anything into law. Just get it done your own way and tell your people whatever you want. I won’t tweet a word to embarrass you. And we’ll re- evaluate in six months whether the results constitute meaningful progress.’’

That’s not a perfect outcome after two years of negotiations, but perfect is not on the menu. Only “better” is on the menu right now. I vote for better.

Don’t get me wrong, Trump was right to insist that the U.S.- China trading relationship had to change. But Trump vastly underestimated in several ways how “easy” winning a trade war with China would be.

Trump, by doing the whole thing in public, clearly prompted the Chinese to remind the U.S. president that they’re not some dumpling restaurant in a Trump Tower that can be bullied into paying more rent. They’re actually one-sixth of humanity, and they hold more than $1.1 trillion in U.S. Treasury bills, notes and bonds, which is 27% of all the U.S. government debt held by foreign countries.

Xi, for his part, completely misread how much Republicans, Democrats and the broad U.S. business community are behind Trump’s unwillingness to tolerate China’s trade abuses any longer — not when China wants to make and export all the same products that we do. If Xi thinks Americans will continue to tolerate the status quo in U.S.- China trade, he is badly mistaken.

So for all these reasons it’s best to go right now for a truce and a period of confidence-building.

While those six months play out, Trump should sign the Trans-Pacific Partnership deal — which brings the 12 biggest Pacific economies, except China, into a global Pacific trade pact built around American values and standards — and then line up all our European Union allies as well.

That way when we revisit this issue in six months, we can present China with a united front to formalize its trade openings. By then it won’t be Trump versus Xi, but rather the world versus China over what are the best reciprocal rules for trade for all. That should be our goal, maneuvering China into a rules-based global competition.