China poses numerous threats to the world economic order. It has little regard for intellectual property and practices a kind of state-sponsored capitalism in which companies owned in whole or in part by the government have unfair advantages. It uses the liberal trade policies developed by democracies to gain wealth and expand its autocratic reach. President Donald Trump is hardly alone in his desire to force change.
Nonetheless, as recent events have shown, he is clueless on how to bring this about. He has said that trade wars are easy to win; actually, they are easy to get into and, like real wars, hard to get out of. And he veers unpredictably between hard-line and conciliatory approaches, making it impossible for U.S. companies to plan.
Last Friday, Trump sharply escalated the trade conflict, increasing tariffs on goods made in China and tweeting that he “hereby ordered” American companies to reconsider their Chinese operations. (Imagine the Republican reaction if a Democratic president had issued such a decree.) This spooked the financial markets, so by Monday the president was back to exuding optimism about the prospects for a trade deal with China.
Trump faces an election next year, Chinese leaders do not. Even though China has more to lose economically from the loss of exports, the Chinese might be tempted to either wait him out or hope he’ll agree to a deal more beneficial to Beijing.
The right way to get serious about China would have started by forming alliances in the cause to gain strength and leverage.
OTHER VIEWS: Window closing on China trade deal
The United States has long enjoyed good relations with allies in Europe, North America and Asia. Those nations could have been brought on board on the need to pressure China. Instead, Trump alienated them with steel tariffs, ad hominem attacks and an inexplicable bromance with Russian strongman Vladimir Putin.
Trump could also have put China on its back foot by joining the Trans-Pacific Partnership, a proposed pact of 12 nations along the Pacific Rim. By having China on the outside looking in on a massive trading zone right in its neighborhood, he would have put it under enormous pressure. Instead, Trump walked away from the deal, giving China a gift while jilting America’s friends in Asia and the Americas.
At home, Trump could have tapped into the antipathy within the Democratic Party to the trade imbalance with China. Having some measure of bipartisanship in his China policies would have helped insulate him from criticism. Instead Trump went it alone, which puts him under enormous pressure with each new economic data point showing weakness.
China is a powerful country with a long-term view on how to play the West’s game on trade while maintaining its autocratic rule. It is not going to be forced into market reforms, let alone democratic governance, by a U.S. president who has isolated his country on the world stage and has trouble seeing beyond his next tweet.
The China trade issue is an important one that won’t be solved quickly. Better to think of it as an ongoing process involving multiple presidents, rather than as a deal that Trump will or will not deliver just in time for the next election.
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