“The tail of China is large and will not be wagged.” - Fourth Century quotation.
We are now locked in a critical trade dispute with China. It could easily escalate into a full blown trade war. The coming days will determine which way the coin will flip. Almost all experts agree that we have allowed China to take advantage of us for far too long. Few dispute that they have been stealing our technology and intellectual property with impunity.
Something has to change.
Let us first stipulate that announcing new tariffs on Twitter is unconventional. Then again, Donald Trump is anything but conventional. His raising of tariffs have caused panic attacks among the Nervous Nellies on Wall Street. Again, Trump may be a lot smarter than his critics think. He knew that the Chinese were backtracking on critical points. They counted on this President being like the others who wanted a signing ceremony so badly that they could get away with some last minute fudging.
They counted wrong.
This President understands several things that his predecessors ignored. First, that states that export raw materials and import finished goods aren’t really countries, they are colonies. We are not a colony and we don’t intend to become one again. Second, China needs us worse than we need them. Their business leaders know just how dependent they are on exports to the United States. Our economy is stronger than it’s been in decades. President Trump knows that if we don’t press the matter now, we are in for a long dark future. A free society like ours will always out-produce closed, government-run economies. Especially in the one thing that will dominate the future, innovation. We cannot blindly continue allowing them to simply steal it.
Let’s also stipulate that a tariff is a tax. Remember, both the United States and China grew into industrial giants using tariffs as a primary source of tax revenue for our central governments. Much has been written concerning who pays for the Trump tariffs. Is it American consumers or Chinese exporters? Probably both. We do know who benefits from these new taxes on imports. Clearly American workers, manufacturers and the federal treasury all will benefit. Proponents of a national sales or consumption tax should be delighted.
John Ferriola, CEO of Nucor, our largest steel producer said that the Trump tariffs were not unfair, but were "simply leveling the playing field." Not only China, but the European Union and most countries in the world, “have a 25 percent or greater VAT, value-added tax, on products going into their countries from the United States. So if we impose a 25 percent tariff, all we are doing is treating them exactly as they treat us." Wikipedia.
Short of ICBM’s, tariffs are about the only weapon we have to force the Chinese to bargain in good faith.
Note that Democrats have been surprisingly careful in their criticism. If they honestly think that they can win the next election, they will have to confront this problem (which will only get worse) should these negotiations fail. They also know that this is popular in blue collar country, which they must win back.
The Chinese wear excellent poker faces and are incredibly patient. They may believe that they can run out the clock on this administration. Their leaders control even the social media. They don’t have to stand for election. That may explain why Trump so publicly played the latest tariff card, upping the ante. He let them know that the price of that strategy would be high.
This President prides himself on his abilities as a negotiator. He doesn’t want a full blown trade war. He believes the Chinese have over-extended themselves and need an agreement more than we do. He has also made it clear that he is prepared to walk away from a bad deal. His negotiating skills will be put to the supreme test. He must be hard nosed while still allowing the Chinese leaders room to save face. They cannot go home admitting that they allowed Trump to wag the Chinese tail. Trump is betting that they don’t want to go home empty handed, tail between their legs, either.
For our part, we must close ranks and stand with our President. The stakes are high. In his words, “We’ll see.”
Gil Gutknecht served six terms each in the Minnesota and the U.S. House of Representatives. He writes about healthcare and political issues of the day.