President Trump’s threat Sunday to raise existing tariffs and impose new ones on Chinese goods surprised world markets and trade experts. Trump was right to make this move, and he needs to stand firm in the face of political and market pressures to backtrack – and Republicans in Congress need to stand with him.
China depends on U.S. trade and investment to fuel its growing economy. Last year, the United States ran a $419 billion trade deficit in goods with China, the largest ever. That represents a large transfer of wealth from the United States to China, and it supports millions of jobs in the People’s Republic. U.S. direct investment in China is also high, amounting to more than $107 billion in 2017 alone. That investment supports even more Chinese jobs and provides China with an even more valuable resource: U.S. technology. Simply put, China needs U.S. markets and know-how to prosper.
Trump’s initial move to impose tariffs was designed to force China to the bargaining table to address long-standing complaints about its manipulation of trade rules. Talks have inched along since, and reports suggest that China has been resistant to enact enforceable changes to its policies. Instead, it is said to be focusing on reducing the trade deficit by increasing purchases of U.S.-made goods and farm products.
Taking that deal would be even worse for the United States than the current arrangement. It would maintain China’s ability to increase its manufacturing expertise at the expense of our economy while giving China’s Communist government even more leverage over the United States. Should such a deal go through, China’s rulers could exert pressure directly on the United States by reducing its purchases at will. Trump seems to grasp this, which is a primary reason for his announcement Sunday.
Re-balancing our trade relationship with China is the single most important item on the president’s agenda. Ending, or at least seriously reducing, China’s favoritism toward domestic firms and theft of U.S. intellectual property would substantially slow its quest to dominate emerging technological fields. Doing that will also strengthen U.S. national security, as China is using this technology and manufacturing capacity to build a military that can contest U.S. power in the Pacific. Nothing should prevent Trump from doing all he can to prevent China from using our own minds, money and markets against us.
China will likely now test the resolve of the president and our nation. If it refuses to agree to a deal that Trump finds acceptable by Friday, he will have to follow through on his threat. That, in turn, will spark howls of protest from all directions. Some will complain that he is effectively raising taxes on U.S. consumers, who will have to pay higher prices on Chinese goods, such as washing machines and toys. Companies that use imported Chinese goods will complain that their prices will go up, too, or even that they might have to reduce operations if their competitive circumstances won’t allow them to pass along price hikes. Still others, such as farmers, will complain about lost sales if China imposes more retaliatory tariffs. It won’t be pretty.
Still, Trump cannot yield. We know what the current trading system leads to: losses of millions of U.S. jobs and the financing of Chinese ambitions across the globe. Our symbiotic trading relationship necessarily means that some Americans will be hurt as this arrangement is reset. That pain is unfortunate, but it is necessary for long-term U.S. interests.
Republicans in Congress will also have to resist this pressure and back the president. They will likely not want to do so. Congressional Republicans, many of whom have come around to Trump’s trade strategies, still have remarkable faith in free-trade orthodoxy, and they will be sorely tempted to revert to that belief as constituents and large business interests come knocking at their doors. They, too, must put country before local interests.
Indeed, the president should ask for a public display of support from congressional Republicans should he have to act this week. Senate Majority Leader Mitch McConnell (R-Ky.) should propose a resolution expressing support for the president and make it clear that he is not a lone wolf on U.S.-China trade policy. Past experience has taught China that it can weaken U.S. resolve by creating powerful friendships with those dependent on Chinese trade favors. The time is now for China to learn that Americans disagree about many things but on this they stand united.
Trump and Republicans say they want to “Make America Great Again,” but they cannot do that if they yield. Great countries must always make great sacrifices at key moments in their history. So long as China remains wedded to a techno-authoritarian government that wants to exert its dominance in Asia, American greatness and Chinese greatness are in tension. Trump and Republicans must bite the bullet and fight for the United States.