China’s decision to hike its tariffs on U.S. imports has raised the stakes in President Trump’s incipient trade war. To win, he’s going to need help from a group he’s already on rocky terms with: our allies.
The United States might be China’s most important market, but it is far from its only one. The European Union is the second-biggest importer of Chinese goods after the United States, and China is its second-largest market for exports. Europe also ran a roughly $207 billion trade deficit with China in goods in 2018. U.S. markets and technology are important to China, but the E.U. could easily provide an alternative source of minds, money and markets for China if it does not support Trump’s actions.
Other U.S. allies face challenges. Australia, for example, is a huge net exporter of raw materials to China. Australia has not suffered a recession since 1991, and Chinese appetite for the gold and other minerals that lie beneath Australia’s surface is a big reason why. Most economists expect that U.S. tariffs will cut China’s economic growth, which in turn will reduce its demand for Australian imports. Trump’s actions will affect our longtime ally as surely as they harm U.S. farmers.
Japan and South Korea, two countries that along with Australia are the United States’ strongest Asian allies, also have extensive trade ties with China. They are net exporters of capital goods, machinery and electronics, and chemicals to China. Again, any decrease in Chinese growth will reduce demand for these products, which in turn will harm their domestic economies.
Most of these countries share U.S. concerns about Chinese growth in influence and military power, although Asian countries feel the effects more directly. Japan is increasing its own naval capacity to combat China’s fast-growing navy, for example, and Australia banned Chinese companies such as Huawei as it develops its 5G network. They are not oblivious to the potential threat the communist government poses to their security, and they thus are inclined to back U.S. actions to restrain China’s growth if it continues to act in irresponsible ways.
But almost all of these countries are also locked in their own trade battles with the United States, placing their cooperation in our fight with China in peril. Trump has also imposed or threatened to impose tariffs on goods from the E.U. and Japan. Those tariffs have pushed both Japan and the E.U. into trade talks with the United States, which are nowhere close to completion. Trump currently has to decide by May 18 whether he is going to impose more tariffs on automobile imports.
The fight with China is too large and too important for Trump to risk allied cooperation over U.S. trade disputes with our allies. European and Japanese competition may harm many U.S. industries, although as with all global trade, it also creates winners among U.S. firms and helps many consumers. More importantly, Japan and the E.U. do not pose a potential existential threat to the United States. Their militaries are small and rely on the United States for defense and intelligence. They are also free and democratic states and are not promoting an alternative social, political and economic system.
China will inevitably try to ratchet up the pressure on the United States if Trump holds firm. That will include more than just hurting U.S. farmers and exporters; it will include trying to woo U.S. allies with favorable deals to find alternatives to the United States. When that happens, Trump will need them to reject overtures that might be tempting and might be in those nation’s and region’s short-term interests. They will be much less likely to do that if they are embroiled in their own trade disputes with us.
Even the United States is not large enough and powerful enough to fight the entire world at once. The global trading economy did not arise overnight, and it will not be reformed overnight. Chinese authoritarian expansion poses a unique and genuine national security threat to the United States and the entire free world. Trump should think strategically, make friends and strike favorable deals with our allies quickly in exchange for their cooperation in our battle with China.