Donald Trump is right about this much: China’s approach to free trade is unfair to the point of being predatory, especially on issues such as intellectual property and its refusal to let foreign companies compete fairly in the Chinese market.
That said, however, Trump has so thoroughly botched efforts to address those and other issues that progress on these fronts has become almost impossible to attain. As a result, the pain about to be inflicted on U.S. consumers, farmers, workers and manufacturers by Trump-imposed tariffs and by retaliatory tariffs from China is going to be much worse than it needed to be, and also much less effective.
As China’s biggest market, we do — or did — have leverage. By coordinating policy with other large economies, thus creating a common front against China with Japan, South Korea, Canada and especially the European Union, and by acting through the World Trade Organization, that leverage could have been magnified significantly to force concessions in how the Chinese operate in the global marketplace.
That was part of the thinking behind the Trans Pacific Partnership, intended to join the United States with 11 other nations on the Pacific Rim to isolate China and provide a counterweight to China’s considerable economic power in that region. But as we know, Trump campaigned on abandoning that effort, and has carried out that policy as president. As a result, the 11 other countries have gone on without us, excluding not just China but the U.S. as well.
And instead of working with other trade partners to pressure China to change, Trump has decided to pick simultaneous fights with all of them. It turns out that you can’t enlist Canada as a trade ally against China when you’re attacking the Canadian prime minister as weak, threatening to blow up NAFTA and imposing tariffs on Canadian steel and aluminum. You can’t ask the European Union to help in your trade war with China when you’ve already started a trade war against the EU and have made it clear that you want the EU itself dismantled. And instead of using the slow but effective mechanisms of the WTO to force China to change, Trump is talking about abandoning the U.S.-built WTO altogether.
It’s pretty amazing. Instead of building a coalition of trade allies around the world to confront China, the United States has succeeded in turning the rest of world against us. We are the rogue nation; we, not China. In fact, the Chinese are trying to woo the EU into joining them in a WTO complaint against the United States. In the words of Xinhua, China’s official news agency, China and Europe “should resist trade protectionism hand in hand.”
So far, the EU is resisting the invitation from China, but Trump’s behavior at the upcoming NATO summit may have the potential to alter their calculus.
The miscalculations driving this mess are multiple, and most of them stem from the deadly combination of ignorance and overconfidence. Trump trade adviser Peter Navarro once confidently predicted that other nations would never dare to impose retaliatory tariffs against the United States, which has proved spectacularly untrue. By insulting their national pride, by demanding submission, Trump has in fact given his counterparts no choice but to fight back and to do so together.
As trade and economic strategy, it’s a disaster. In fact, the approach doesn’t rise to the level of strategy at all. The only plan is to act like a bully in every situation, at every opportunity, and so far it is backfiring on a grand scale.