President Donald Trump finds himself in, at least, two major standoffs with serious economic implications. Domestically, the US President faces a prolonged government shutdown over border wall funding. It is a situation that hurts Federal workers and contractors as well as the many communities with local economies fueled by government spending. It is also a situation that could push the United States economy into recession. Internationally, Trump is embroiled in a trade war with a major focus on China. It is a situation that could slow the US, Chinese, and global economies. Having opened two war fronts, Trump needs to resolve one situation in order to give himself the leverage to achieve certain victory in the other. While the relatively trivial nature of the Trump border wall and the lack of economic gain for Americans should drive him to yield on the border wall, he may well be more inclined to reach a compromise with China in order to focus on the border wall.
For Donald Trump and his anti-liberal, Right supporters, his political rivals are the true enemies and the greatest threats to the United States, so domestic political conflicts are viewed as far more serious than high stakes foreign conflicts. Although Trump has called himself a so-called “anti-globalist,” the simple truth is that his history as an international business developer says otherwise. Consequently, he is more inclined to compromise on trade with China than on the border wall with Democrats. Trump has, of course, rebuffed deals that would have removed US tariffs on Chinese goods in the past, but a prolonged trade war with China can be perceived as a failure to achieve victory and Trump does not want to look weak as he attempts to break Democratic opposition. For their part, the Chinese have been repeatably willing to rebalance the US trade deficit through increased purchases of US goods. They have even entertained the idea of eliminating forced technology transfers that foreign companies must agree to in order to do business in China.
Although an end to intellectual property theft by legal and illegal means would be a major victory, if China actually can and will honor an agreement, allowing China to rebalance the US-Chinese trade deficit with pledges to purchase more US goods would only offer a temporary fix. Unfortunately, such concessions tend to be dubious and beneficial to China. China needs food to feed its massive population and nature resources to fuel its economic expansion, so China could easily rebalance the trade deficit with the US by targeting agricultural products and natural resources. The problem is that it does nothing to help bolster the high-wage sectors of the US economy. China seeks to dominate high-tech, high-value industries in order to lead the global economy, so agreeing to such a compromise would simply offer a superficial solution. Meanwhile, the Chinese economy needs time to diversify its consumer base. Concessions give China the time to find alternative markets to the United States while they also give China the time it needs to buildup its domestic consumer base and trade relations that offer Chinese consumers cheep imports. China is already poised to overtake the US as the world’s largest retail market in 2019. Until the domestic Chinese economy can produce the consumers it needs to survive, it must rely on foreign consumers like those in the US. If China cannot reach a compromise with the US, it will not be able to achieve its goals.
To restructure the US-Chinese trade relationship in a way that addresses US interests, the United States needs to raise the cost of imported goods to balance the economic disparities between the two economies, the lack of regulatory parity, and the lack of tax parity in order to make US-made goods competitive. Just as Chinese consumers need to buy more to create a self-sustaining economy, US consumers must pay more to create a sustainable domestic economy that produces the jobs consumers need. Consequently, any resolution of the US-Chinese trade war must include semi-permanent tariffs in order for Donald Trump to achieve victory over China. The goal of the trade war was to confront China over its predatory trade practices then recalibrate Chinese trade relations. Beyond the United States, China is a major global power that is using major investments and resource grabs in Asia, Africa, and South America to gain economic supremacy. Although China’s predatory practices can boost the GDPs of poor countries and the Peoples of these countries can receive the benefits of improved infrastructure, the selling of their lands, natural resources, and industries deprive them of future opportunities while securing opportunities for Chinese workers.
With that in mind, a trade war against China is about shifting the flow of global commerce away from Chinese control, which takes time. A just trade war against the government of China, which acts as a giant corporation in many respects, and transinternational corporations amassing the wealth of the world would reverse the concentration of wealth and economic power. To achieve success, Trump needs to reduce US dependence on foreign products and diversifies what countries the US imports from. Trump cannot, therefore, win a trade war in a short period of time nor can he win it without permanently changing the structure of US tariffs. Where the government shutdown over border wall funding has evoked a great deal of outrage, Trump’s trade war is a policy that can attract far greater support. A harmful, prolonged government shutdown over the building of a border wall that protects a portion of desert not actually used for trafficking is not something that can be widely supported. Taking a stand against predatory trade policies and trade policies that undermine individuals is easy to support in spite of the economic fallout, especially if a trade war is conducted in a way that empowers individuals across the globe.
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