The Problem With Starting (Another) Trade War With China

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During Trade War One, America’s trade deficit with China shrank, but its overall trade deficit grew as other nations stepped into the breach. Like the Tommies and the Jerries mired on the Western front, the United States and China stalemated. The real winner of Trade War One, the Journal’s Davis and Wei concluded, was Vietnam, which increased exports to the United States by the same $50 billion that China reduced them.

China’s refusal to change its behavior left the incoming Biden team with a Hobson’s choice: Surrender or stay the course. For three years Biden stayed the course; now he’s escalating. The stated impetus is to protect his $860 billion investment in developing green technologies through the infrastructure law, the CHIPS Act, and the Inflation Reduction Act. Given the Chinese lead on manufacturing electric vehicles and solar panels, trade protection may be necessary to develop an American market.

But of course Trade War Two is at least as much a war between Biden and Trump as it is a war between the United States and China. A fact sheet on the new policy notes acidly that the previous administration’s China policy “failed to increase American exports or boost American manufacturing, as it had promised.” A January 2024 paper by economists David Autor of MIT, Anne Beck of the World Bank, David Dorn of the University of Zurich, and Gordon Hanson of Harvard noted that although Trump’s trade war “has not to date provided economic help to the US heartland,” it was a great political success there, making Republican voters out of Democrats in 2020. These manufacturing regions are the same places Biden must win in order to secure reelection. Trump has now upped the stakes by proposing a 60 percent tariff on all Chinese imports and a 10 percent tariff on imports from every other country. This without question would be inflationary (though Trump, preposterously, denies that). As details of Biden’s plan leaked out this past weekend, Trump pledged to put a 200 percent tariff on any cars China may soon manufacture in Mexico.