On Trade, the Die Is Cast With China
President Trump has irreversibly changed the future of China. He is in the process of creating a new world order with regard to trade. We will look back 10 years from now on 2019 and refer to China as BTC (Before Trump China) and ATC (After Trump China). BTC was the world where China operated as it wished with no repercussions. ATC is the new world where companies will likely be forced to pick a side and trade with either the U.S. or China.
Even if a trade deal is ultimately reached, companies know it is unlikely to be honored by the Chinese. That risk is real and must be managed. New tariffs from a broken deal could destroy profit margins overnight because the added tariff costs would make the products uncompetitive. Companies and countries that want to trade with the U.S. will likely begin a dramatic turn away from China. Companies such as vacuum maker Bissell are already looking for other countries outside of China to invest and manufacture products for sale in the United States. This trade shift will accelerate the long decline in China’s manufacturing base that has driven its massive exports.
Since entering the World Trade Organization in 2001, China has grown its economy to become the world’s second largest behind the United States. Its economy surpassed France in 2005, the U.K. in 2006, Germany in 2007, and Japan in 2010.
China is not hiding its intent to be the world’s sole superpower. The Made in China 2025 plan lays out China’s goals to become the dominant producer in artificial intelligence, genomics, robotics, and aerospace, just to name a few. It has used and will continue to use any means necessary to achieve this goal, including tariffs, government subsidies, and a massive amount of intellectual property theft. China continually violates its agreements with the WTO -- with few real consequences.
The world knows China has been a predatory trading partner. It is time other countries publicly unite with President Trump, no matter their political animosity toward him. There is a new sheriff in town, and he has started the irreversible cascade of companies leaving China. After Trump China (ATC) should benefit the United States and many other countries as companies relocate manufacturing not just to other Southeast Asian countries, but also to Mexico, Central America, and the United States. China just got too greedy.