Can Biden learn? Trump’s trade war with China backfired big-time
It was Americans who paid the cost of Trump’s trade war through higher consumer prices.
As Trump scurried from the White House this week, labelled as the worst president in the history of the United States, he leaves a legacy of shattered promises and policy failures. His farewell speech contained the usual trumpet-blowing about vastly over-rated non-achievements, from creating the greatest economy the world has ever seen, to obliterating Islamic State, from not starting any new wars, to confronting China.
The fact is that while the United States has floundered under Trump, China has emerged ever-stronger. That was not how it was supposed to go. When Donald Trump won the White House in 2016, he bragged about how he would reverse China’s rise as a global economic power to claw back benefit for the US. Accusing China of “raping” America, the Republican president vowed to bring manufacturing jobs back – and make Beijing pay for it.
“We imposed historic and monumental tariffs on Chin,” declared Trump this week as if this was an outstanding achievement of his presidency.
Turns out, however, China’s trade balance with the United States is the same yawning gap in Beijing’s favor as when before Trump took office.
Overall, China’s economic growth has rebounded at the end of last year in spite of the global pandemic and severe lockdowns. In the final quarter of 2020, China’s economy grew by 6.5 per cent which is a rate comparable to the annualized figures for 2018 and 2019. Meanwhile, decrepit Uncle Sam seems hardly able to get out of his sickbed.
The spectacular economic performance was driven by record Chinese exports – an overall global surplus of $535 billion, the second highest since 2015. Of that surplus, trade with the US contributed $317 billion, which was reportedly 7 per cent higher than in 2019.
Recall it was Trump who was the belligerent in the trade war with China. He claimed back in 2018 that “trade wars were good and easy to win”. The former real estate magnate and self-proclaimed business genius was going to teach China a lesson.
Trump imposed over $300 billion in tariffs on Chinese imports in a gambit that was supposed to reverse chronic US trade deficits and to force American manufacturing companies to bail out of China and set up shop in the US rust-belt states.
What happened didn’t go to plan, at all. China continued to export at much the same volume and it was American consumers and companies that ended up paying higher levies on imports. It was Americans who paid the cost of Trump’s trade war through higher consumer prices.
And the rust-belt stayed rusty. American manufacturers continued to operate from China despite Trump’s admonitions to return.
It is estimated that the tariffs imposed by the Trump administration on China cost Americans 245,000 jobs lost to higher prices and loss of exports. That’s because with global supply chains, US manufacturers imported Chinese parts at higher cost which was passed on to their export prices resulting in loss of market share. Far from reinvigorating the US economy, Trump ended up making it substantially worse. He leaves office with the highest American trade deficit recorded in 14 years.
What “business-genius” Trump did “achieve” was to make China a much stronger economic power as the United States continues to wane and wither.
Trump’s self-defeating belligerence towards China was aided and abetted by his pig-headed Secretary of State Mike Pompeo. With provocative arms sales to Taiwan in a flagrant attempt to undermine China’s sovereignty, along with ramped up sanctions based on allegations of violations against Hong Kong protesters and Uighur Muslims in Xinjiang province, and military tensions in the South China Sea, the Trump regime has set the stage for more dangerous confrontation under the new administration of Democrat President Joe Biden.
Biden’s incoming administration picks have already signaled they will continue the confrontational policy towards China as charted by Trump. That may change, however, with realities biting.
What the American political class fail to understand is that China’s and Asia’s rising economic power is unstoppable. Demographics and better economic planning are ensuring that, as Chinese President Xi has remarked, time is on China’s side, whereas the American empire is crumbling. The contrasting impact and management of the coronavirus pandemic provide clear illustration of the divergence.
Another clear illustration is how Trump launched a trade war he thought he would demolish China with. Like many other Americans, Trump is so full of hubris and ignorance of modern historical realties he couldn’t see how wrong he would be. The dragon ate the eagle and spat it out.
It’s not clear if Biden and his incoming administration will have the insight or will to abandon American hegemonic hubris towards China (and Russia for that matter). It’s not as if China (or Russia) is demanding an American surrender. All that is required is for the United States to stop treating the rest of the world with its anachronistic Cold War mentality, and to engage with others in mutual partnership, or as China repeatedly urges, in “win-win” solutions. Trump’s abject failure is proof of how the US needs to find a new paradigm of economic and foreign policy.
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