I think there’s a missing piece, a lapse in understanding in this editorial from the editors of the Washington Post on the failure of President Trump’s strategy with respect to China. Oh, I agree with them that the strategy was not particularly successful.
The results are in: China didn’t buy anything extra from the United States.
The purchases of U.S. exports that China did make in the past two years barely got back to the amount China was purchasing in 2017 — before Mr. Trump started his trade war, according to calculations by Chad P. Bown of the Peterson Institute for International Economics. U.S. exporters will never get back the sales they lost, and few have seen any meaningful growth in their sales to China under the “deal.†“The only undisputed ‘historical’ aspect of that agreement is its failure,†said Mr. Bown.
The main result of Mr. Trump’s bluster on trade was higher costs to the American public. Numerous studies have shown how tariffs were mostly passed along to American consumers, causing prices to rise on thousands of popular everyday items. It was a debacle that was easy to predict. Business leaders, economists and former trade officials from both parties warned the Trump White House repeatedly that the nation would have been better off without the trade war and the tenuous agreement that was ultimately reached with China (and not adhered to).
The smarter move would have been to keep the United States in the Trans-Pacific Partnership, the big trade deal with other nations in the Pacific, including Vietnam, Singapore, Canada, Australia and Chile. The whole purpose of the TPP was to boost trade among other nations and lessen reliance on China, which was excluded from the deal. But Mr. Trump pulled out of the TPP in his first week in office, and other nations went ahead and completed the trade pact on their own. In an ironic twist, China is now petitioning to join.
concluding:
The United States has just learned costly lessons about the futility of trade wars and how China can’t be trusted to honor its deals. Now the Biden administration has to figure out how to hold Beijing to account for failing to fulfill its commitments. One conclusion ought to be clear: More tariffs are not the answer.
The missing piece is that I don’t think that the editors understand that the preferred strategy of the Chinese authorities is autarky. They don’t particularly want to buy anything from us they don’t have to or from anybody else for that matter. They’d rather be self-sufficient. They have made that abundantly clear.
Where I think I disagree most with the editors is in the end state. I think the end state is giving the Chinese authorities what they want and not selling anything to China, not buying anything from them, either. Our entire experiment in engagement with China has been a dreadful mistake, eviscerating U. S. productive capacity and strengthening China.
I won’t dwell on President Trump’s mistakes. My hypothesis is that he overestimated his own ability not to mention his energy, preferring bilateral trade agreements over multi-lateral relationships like the Trans-Pacific Partnership. One only has so much time, energy, enthusiasm, and ability. That’s why multi-lateral agreements exist.
This main question at hand is now what? How concerned are South Korea, Japan, the Philippines, Australia, and New Zealand about an aggressive, truculent, and hypersensitive China? There is probably an opportunity there for us if we have the wit to exploit it which, if the past is any indication, we don’t.
I take a more nuanced view.
Right after the deal was signed, the pandemic hit. And that really did blowout every premise of the deal.
On a macro level; the economic policy in the US was to subsidize consumption, while China was to subsidize production. Second, China’s strategy of zero COVID while the US strategy (really a non-strategy) of living with the virus meant China had a reduced need for US goods and services (tourism/education) while US had a greater demand for Chinese goods (for WFH).
From this year on, I suspect a lot of the pandemic factors will revert and we will see where the true position lies.
For example, given inflation, I don’t think China or its other trade partners (Russia, Iran) want more U.S. treasuries. That in itself should induce China to either buy more American goods or sell less Chinese goods. The demand for goods related to WFH is over (everyone’s got their home gym, home office). Also, on the supply side, the geopolitical issues and the realization zero-COVID will eventually fail in China (and the attendant disruption) means the incentive to setup bases in other countries is never more obvious.
Also, while it sounds crazy, but the U.S is the marginal producer for fossil fuels (if Biden relaxes his opposition to production) so if energy demand keeps going up the US is where consumers will turn to.
How concerned? They all and another dozen or so all signed on to RCEP. That says it all. They see China as an opportunity.
China is winning the economic war with the US hands down, because it offers its trading partners actual economic benefits, whereas the US only offers the possibility of global war. We are are finished as a world power.
PS. The insane hysteria over Russia’a non-threat to Ukraine, today’s Tonkin incident and WMD, merely shows how far gone our rulers are.