By Saeed Sobhani

Trump in economic stalemate

August 21, 2019

The President of the USA is not in a good situation! He has practically lost the economic and trade battle with China. In recent days, many American analysts, economists, and politicians have warned of a continuing US-China economic war. They are right in believing that this battle will end at the expense of Washington. Here is some analysis and news about the US-China economic battle:

Trump's trade war with China will be worth the fight

As CNN reported, For years, and through multiple presidential administrations — Clinton, Bush, and Obama — the United States has naively looked the other way while China cheated its way to an unfair advantage in the international trade market. It took a long time to get to this point, and it's not going to turn around overnight. But with President Donald Trump's long-term approach to trade policy, the United States is in a good position to make up for the misguided policies of the past, which resulted in millions of lost jobs and thousands of shuttered factories.

A bad day or a bad week on Wall Street is not an indication that Trump's policy is failing. Market volatility is neither a surprise nor a reason to head for the lifeboats. The markets are going to react and fluctuate as the United States and China go back and forth in trade negotiations.

As the US Treasury Department reported in May, there has been, and is, an "exceptionally large and widening" bilateral trade imbalance between China and the United States."

It's not as though China hasn't had a chance to change its ways. It simply chose not to by, among other things, willfully ignoring its G20 commitment to fair trade, dumping products below cost into US markets and stealing intellectual property.

China has also recently been labeled a currency manipulator by the Treasury Department. The Chinese government, not the free market, sets its currency's value against the dollar. When China allows its currency to fall in an attempt to boost its own exporters, American companies and workers pay the price. Only by applying pressure will China be motivated to change its destructive trade habits. The United States will apply an additional tariff of 10% on approximately $300 billion of Chinese goods — some effective September 1 and some effective December 15. This puts the squeeze right where it needs to be — on China. The delay in tariffs on some Chinese goods from September to December, which the president announced Tuesday, is strategic and not a retreat on tariffs. It was done to avoid impacting the holiday season because tariffs will not apply to goods that have been ordered. Thus, American retailers and consumers will likely not get stuck with the extra cost for those goods tariffed in December.

Something had to be done to end China's unfair practices, and rather than capitulate to the predictions of recession and calamity, we need to stay the course and continue to add tariffs to Chinese goods. We as a nation simply cannot allow China to continue to have its way with our economy.

Of course, trade wars don't come without risk or impact, and American farmers are bearing the brunt of the fallout. In what was clearly a retaliatory move, China and other countries placed stifling tariffs on American agricultural products. Trump stepped in to assist with $14.5 billion in subsidies that go directly to farmers to make up for the loss of income, the US Department of Agriculture announced in May.

The good news is that the USDA predicts a 10% increase in farm profit in 2019 to $69.4 billion after a 16% dip in 2018, according to the USDA Economic Research Service.

It's important to view the current trade war within the context of the Trump administration's broader trade policy.

For example, if we focus only on farming, the president negotiated the US-Mexico-Canada Trade Agreement which, if Congress does its job, will provide farmers a fairer market to export their goods.

Perhaps this is one of the reasons why Trump's support among farmers remains strong, despite the trade war's impact on their bottom line. According to a recent survey by the Purdue Center for Commercial Agriculture, 78% of farmers said they believe the trade war will ultimately benefit US agriculture.

China appears ready for a long flight, but there are indications it is already feeling the strain. Tech companies — at least 50 to date — are in the process of moving significant portions of their manufacturing operations out of China and back to other countries in an effort to get out from under US tariffs.

It seems that our choice is clear: We stay in this for the long haul to ensure that American businesses can compete on a fair playing field, or we panic and continue to allow China to play with a corked bat. The former is sound trade policy. The latter is bad for US business, prosperity and security.

Also, CNN reported that Donald Trump is on a "fool's errand" with his ongoing trade war with China, Democratic presidential candidate Pete Buttigieg said Sunday.

CNN's Jake Tapper asked the South Bend, Indiana, mayor on "State of the Union" in an exclusive interview why he thinks China would strike a trade deal with him if, as president, he were to ease Trump's pressure and end the President's tariffs imposed on Chinese goods. The US, Buttigieg said, has "a lot of different forms of leverage in the relationship."

"But it's also a fool's errand to think you will be able to get China to change the fundamentals of their economic model by poking them in the eye with some tariffs," he said.

Buttigieg's comments come as fears of a recession in the US grow, with critics of the President's economic policies pointing to Trump's trade war with China as a contributing factor in the potential economic slowdown. Last week, the Trump administration -- in its latest turnaround on trade -- said it would delay new tariffs on Chinese-made consumer goods including cell phones, toys, and video game consoles until December 15. Last year, Trump imposed tariffs on about $250 billion in Chinese-made goods, targeting industrial materials and components. Earlier this month, he said he would add a 10% tariff on an additional $300 billion of Chinese-made products on September 1, which would effectively put a tax on all Chinese goods coming into the United States.

Trump tweeted Sunday afternoon about negotiating trade deals with China, writing the country is "Poised for big growth after trade deals are completed."

"Import prices down, China eating Tariffs. Helping targeted Farmers from big Tariff money coming in," Trump wrote. Buttigieg, in his interview Sunday, expressed concern for American farmers, who he said were getting "killed" by Trump's trade war. Farmers have been among some of the hardest hit by China's retaliatory tariffs, which were put on a range of commodities including soybeans, corn, and wheat.

"I was just in Iowa, in rural parts of the state, talking with a lot of farmers who -- many of whom are Republicans or supported this President and are now asking the question, 'How much longer are we supposed to take one for the team?' The President has said repeatedly that he's on the cusp of getting a deal. The President has failed to deliver a deal and I expect he will continue to do so," Buttigieg said.

U.S. can’t influence Beijing’s decision on HK

Political and public opinion elites in the US must understand that although they have the ability to instigate Hong Kong's radical protesters and make it harder for Hong Kong to restore order, they absolutely cannot influence Beijing's decisions on Hong Kong's situation.
Pushed by media, high-ranking US officials recently made ambiguous statements on linking China-US trade negotiations with Hong Kong situation. But such statements, which try to interfere in Beijing's moves, are not based on US national power or political resolve. They're more like a show that the US politics is not short of.

Washington is actually reluctant to link China-US trade negotiations with other thorny problems. China-US trade talks have already been difficult for both sides. Washington has used all leverages, and it is highly possible to use other issues as bargaining chips to strengthen its status in negotiations. It will not use trade negotiations as a bargaining chip to push forward the US demands in other areas. The trade negotiations have already been difficult for Washington. It cannot afford any other burden. 

Some Americans lack a clear strategic estimation of their country. They still believe the US is capable of anything, and can even issue orders to a major power like China. But the US is forced to strategically contract. The US is still aggressive in public opinion and values infiltration, but its finance cannot support the superpower to spend lavishly on politics. 

The US failed to dictate China's choices on important issues in the past, and it is even more impossible to do so today. To refuse an unfair trade agreement, China has borne the unprecedentedly large tariff sticks and the US suppression on Huawei and other Chinese companies. After all of these, none of the US threats to impose sanctions on China will have any deterrent effect. 

Because of the trade war, the US has lost the ability to impose additional pressure on China. China does not need to consider the US attitude when making decisions. What else can Washington do even if it is dissatisfied? Beijing hopes for a soft landing of the Hong Kong problem and Hong Kong's internal forces can restore order with the central government's support. But if Hong Kong cannot restore order by itself, Beijing's strong intervention will be the only choice. It is stipulated in the Basic Law. 

Beijing will not use the choice rashly, but it will not avoid using it when necessary. This is the country being responsible for Hongkongers. Chinese people have found that US politics is not always based on truth. The US election needs tricks, and it is not a process in which candidates honestly communicate with people. The US stock markets are also filled with all kinds of exaggerated information. Investors always have to be highly vigilant. Double standards demonstrate US political hypocrisy. The US sophistry has fooled many medium and small countries. Thanks to China's reform and opening-up and its increasing political stability, we are increasingly capable of distinguishing the US' ill intentions. 

The US should stop its meaningless threat of linking the China-US trade talks with the Hong Kong problem. Beijing did not expect to quickly reach a trade deal with Washington. More Chinese people are prepared that China and the US may not reach a deal for a long time. If Washington wants to link trade talks with Hong Kong under such circumstances, it so flatters itself.

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