Galston’s Take

Here’s William Galston’s take on what should be our belated response to China’s actions:

Over the past decade, our manufacturing output has stagnated, as has the sector’s productivity. And in some respects, our manufacturing sector’s decline affects our national security. As we learned during the pandemic, the U.S. is highly dependent on other countries, including China, for drugs and other essential medical supplies. Nor can we hope to keep pace with China’s rapidly growing navy without regaining our lost shipbuilding capacity. Further, as we’ve seen since Russia’s invasion of Ukraine, our defense industrial base has weakened dangerously since the fall of the Soviet Union. But the remedy for these ills is a set of targeted policies, not a global trade war. The chainsaw isn’t an appropriate tool for restructuring the international economic order any more than it is for reforming government.

Antagonizing our friends around the world is a poor strategy for solving the heart of our trade problem—our asymmetrical relationship with China. Xi Jinping suppresses purchasing power and social benefits for his country’s citizens while subsidizing exports, allowing Chinese products to undercut those produced in other industrialized countries. China then uses the proceeds from artificially elevated export sales to direct investment to favored industries and new technologies while funding a massive military buildup.

In response to prior U.S. efforts to stem this flood, Chinese manufacturers have relocated significant production to countries such as Vietnam, whose cooperation the U.S. will need if it hopes to shut off this Chinese escape valve. Any way you look at it, imposing huge tariffs on every country with which the U.S. has a bilateral trade deficit makes no sense.

He changes the subject quite a bit so you’ve got to be able to “read around” his frequent digressions but the conclusion is inescapable. Reducing our trade with China is in our national interest. The risks of not doing so are simply too great. We can still afford to subsidize trade with our “friends”. I put “friends” in quotes because I genuinely believe we have no friends. We have clients and we have adversaries but no friends.