Trump Is Playing a Long Game With China
America has the upper hand in the ongoing trade negotiations with China, and the temporary reprieve that President Trump recently gave the Chinese regime is only further proof that our strong economy grants us a degree of flexibility that Beijing can’t hope to match.
There are a lot of misconceptions about the president’s announcement that he is postponing certain tariff increases on China.
It’s true that this temporary delay addresses the one area where short-term access to cheap consumer goods has the potential to noticeably impact U.S. consumers: Christmas gifts. Overall, consumer goods are not rapidly inflating in price, and the postponement will ensure that nothing of the sort takes place during the busiest shopping season of the year.
But, the relentless pressure that President Trump’s strategic counter-tariffs have put on China and its export-dependent economy is not stopping. Trump did not eliminate the tariffs. He partially delayed 10% tariffs on the half of Chinese imports yet to see increased levies. Some will still be implemented as planned on Sept. 1, with the rest going into effect Dec. 15 — unless, of course, Beijing meaningfully demonstrates its desire to reach an equitable trade deal before then.
China seems to be playing hardball, trying to wait out the Trump administration in the hopes that a new administration will return to complacency toward China’s rampant trade abuses. But that’s a long time to endure the pain that Trump’s tariffs are already inflicting on the Chinese economy.
For example, the president’s recent delay gives American companies that are in the process of transitioning their manufacturing out of China more time to complete that transition. Big tech companies are already taking their manufacturing out of China. Retailers are pulling out as well.
According to the Nikkei Asian Review and The Wall Street Journal, Apple is considering moving 15% to 30% of its production capacity from China to Southeast Asia as part of “a fundamental restructuring of its supply chain.” When announcing the recent tariff delay, the president noted that Apple CEO Tim Cook made a “very compelling argument” for delaying the tariffs as they would aid Apple competitors such as Samsung, which manufactures its products in South Korea.
Once supply chains move out of China, it will be difficult to get them back. Moving production out of a country can be expensive and time consuming -- as can moving it back.
This flight out of China presents a severe long-term challenge for its totalitarian government, which relies on rapid economic growth and rising living standards to provide some legitimacy for its dictatorial rule. But, as the Chinese Communist Party has increasingly scaled back the free market reforms that got its economy going in the first place, it has been forced to prop up its economy with its escalating “techno-nationalism” and outright theft of technology from American companies.
Now, the party is scrambling just to keep the economy from further contracting in the face of tariffs in their largest export market, the United States -- and the longer-term impact of companies moving their supply chains outside of China. Beijing has already been forced to unleash a new round of subsidies in hopes of propping up their deteriorating economy until after the 2020 U.S. presidential election.
Unfortunately for China, that plan is not working. Our decision to finally get tough on trade with China is having far less of a negative impact on the U.S. economy than establishment American commentators and politicians predicted. The American economy remains strong, despite stagnating growth elsewhere in the world.
The Trump administration is right to insist on a comprehensive economic reform agenda from Beijing — one that protects American intellectual property, allows U.S. firms to compete in China’s domestic market the same way theirs do in ours, and punishes predatory trade practices such as dumping government-subsidized goods in our market at artificially low prices designed to drive American companies out of business.
The partial tariff delay has to be understood in the context of that long-term goal. President Trump has galvanized bipartisan support in the national competition against China and is energetically using the tools of national power to advance the interests of the United States. The tariff delay is a tactical move in the larger chess match, designed to protect American consumers and businesses while continuing the pressure on Beijing. It’s a smart move – one of a number of smart moves the administration has made on a number of fronts, as it maneuvers for advantage in the long game with Beijing.