Trump's Trade War: A breath of fresh air

Promoted from the diaries by streiff. Promotion does not imply endorsement.

Many Republicans are trashing a punitive 25% tariff on all goods coming from China.  You know, the stuff you buy at Wal-Mart.  Everything that says “made in China,” the plan is to tax that.  Our heritage is a “free trade” heritage.  If one country raises protectionist barriers to trade then others will as well.  A great example of where this leads is North Korea which has cut off trade from the rest of the world.  Do we really want an economy like North Korea?

At least that’s the argument.

Let’s start with an acknowledgement:  Our two greatest military adversaries in the world are China and Russia.  While we are in neither a hot nor a cold war with either, we should at realize these nations want to take our place.  If they can do it militarily they will.  If they can do it economically they will.  If they can do it diplomatically they will.  China is seeking a military/economic solution to replacing the US as the primary power in the western Pacific.  To do that they need technology, military, and economic strength.

Technology.  We have allowed much of our technology to be “transferred” to Chinese companies where it is ultimately property of the state.  China has grown the last several decades largely by taking our outsourced business and running factories to build our stuff.  In the process they have learned how to build our stuff.  Consider Huawei and how their phones are essentially equivalent to the phones China manufactures for the rest of the world.  We have openly handed to China the technology they need to manage economic and military might.

Military.  In the event of war we should acknowledge that China would have some major advantages.  1) The war would be in the Pacific, not on US soil.  This means any conflict would have to be a long range projection of military might. 2) Denial of access weapons have improved dramatically recently.  3) The Chinese have 5 military age males for every 1 military age American male.  If China were to act the most likely scenario would be a rapid take over of a region with minimal loss of life (i.e. Russia with Crimea) where a response would have to be disproportionate to the original action.  The disproportionality makes any response less likely, raising risk for allies like Taiwan.

Economic.  China is now the second largest economy in the world.  We helped them get that way by outsourcing our manufacturing, but now much of Asia is more closely tied to the Chinese economy than the American economy.  China is seeking to have the Yuan replace the Dollar for international trade (at least regionally).  They have the economic strength to build a coalition in Asia, especially if the neighbors fear military action.  If you are Taiwan and you worry whether the US would be willing to expel the Chinese after a Crimea like invasion and China is offering sweet deals on trade, do you consider swapping allies?

So, free trade?  Why should we continue free trade with China?  Does it make us richer?  Probably.  Does it make the Chinese richer?  Certainly.  Consider the “free trade” argument but replace China with Japan and make the year 1940 and the question steel and petroleum.  There are times when the benefits of free trade are outweighed by the negatives, especially when those negatives involve making adversaries stronger and richer.  We should not lose sight of the fact that China wants the exact same “free trade” agreements that we have had for decades.  Those deals have blocked American companies from selling into China, but have managed to transfer our manufacturing skills, technological secrets, and massive amounts of money to Chinese state run companies.

If we are completely cut out of the Chinese economy we lose $120B worth of annual sales.  Tragic, I know.  However, that is out of $36T of industrial output.  We lose 0.3% of our economy.  Put another way, if we lost all our exports to China (and nobody else bought them) we still would have had 3% GDP growth last year.  Then we have to replace the $500B of goods we bought from China.  We have a couple choices 1) outsource to India helping to advance a regional offset to China 2) outsource to Mexico building their economy and hopefully ending illegal immigration in the process 3) outsource to Africa helping the world’s poorest people out of poverty.  The reality is that any of those options is better for our nation than continuing to transfer all our manufacturing knowledge, technological prowess, and industrial base to an adversary.

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