THE UNITED STATES and China are not in a trade war, yet. By law, the Trump administration cannot impose the tariffs on $50 billion worth of Chinese goods it just threatened until American interest groups have had a month to lobby for and against them. Actual tariffs, and the inevitable Chinese retaliation against the list of American products Beijing targeted Tuesday, are probably months away. Which raises the questions: Is there still time to avoid a mutually destructive conflict, and if so, how?
Ideally, there would be a negotiated solution addressing long-standing and legitimate American commercial complaints against China. Contrary to the hopes of many Americans when the U.S.-China trade relationship began in earnest two decades ago, that country’s ruling elite is committed to a mercantilist strategy, most recently expressed in its Made in China 2025 program, which aims at dominance of cutting-edge industries from aerospace to artificial intelligence. Presumably the Chinese want to achieve this using the same tools — import barriers, forced technology transfer from Western firms, piracy of intellectual property — that they already employ. Given the failure of past U.S. administrations to talk China into reform, Mr. Trump is not wrong to try more coercive tactics. Recent promises by Chinese Premier Li Keqiang to ease access for U.S. companies were vague but at least suggest Mr. Trump got Beijing’s attention.
Unfortunately, he enters the talks having alienated many Western countries that might otherwise support him based on their shared frustration at China’s mercantilism. Incredibly, Mr. Trump has accused old friends such as Canada of being almost as bad as the Chinese, and has threatened them with tariffs, too. And he has renounced the Trans-Pacific Partnership, which promised to create tighter bonds, commercial and strategic, between the United States and a ring of countries around China.
It is also unclear what the president’s ultimate “ask” for China is. His high-level aides have reportedly proposed that China cut tariffs on U.S. automobiles, buy more U.S.-made semiconductors and open their financial services market; yet none of this would make a “substantial” dent in the bilateral U.S.-China trade deficit, which Mr. Trump demands.
Parceling out market access might actually reinforce Chinese mercantilism. A new paper by experts at the Information Technology and Innovation Foundation (backed by the very high-tech industry Mr. Trump is ostensibly going to bat for), argues that pressure on China is in order but that its goal should be to make China comply with the rules-based international trading system — not necessarily for the sake of protecting U.S. industry but to secure a level playing field for everyone, America included. Mr. Trump hubristically says that trade wars can be easy to win, but the fact is China has a lot of leverage, including the ability to sow division within the United States, as it has already done by threatening tariffs on the products it buys from pro-Trump parts of the country.
China also has the advantage that comes from being more satisfied with the status quo than America is. The question remains whether Mr. Trump, beyond his dissatisfaction, has a clear and constructive vision of how he wants that status quo to change.