Free Trade

As the U.S. and China Reopen Trade Talks, Trump Ought To Change His Strategy

The economy is doing well enough—except for all the sectors hurt by the trade war.

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The unemployment rate is at a 50-year low, and the U.S. economy added about 161,000 jobs last month—yet three sectors of the economy are effectively in recession, according to Moody's Analytics chief economist Mark Zandi: manufacturing, farming, and shipping.

If only there were a common thread that could explain why they are lagging behind!

That dynamic—a generally strong American economy, but one that's obviously showing the effects of a trade war that's lasted for 18 months—sets the stage for this week's meeting between trade negotiators from the Trump administration and the Chinese government. The meetings planned for Thursday and Friday in Washington, D.C., will be the first face-to-face trade policy discussions in more than two months. And they are happening with the threat of another tariff increase looming: Trump has promised an escalation of the trade war in mid-December.

Observers are skeptical that a trade deal will be in the offing. "If you're looking for good news, they didn't cancel the trip," Tom Block, a trade policy strategist, told CNBC, underscoring how little real good news there is.

Indeed, the U.S. and China are now feuding over much more than soybeans and steel. The Commerce Department on Tuesday announced that it would blacklist 28 Chinese-owned companies in retaliation for China's treatment of Uighurs and other Muslim minority groups. An executive for one of the teams in America's largest professional basketball league tweeted criticism of China's crackdown on Hong Kong, causing controversy. South Park is involved, too.

In some ways, the heightened tensions between the two countries may give a domestic political boost to Trump's trade war. Challenging China may seem more urgent now than ever. But tariffs are still the wrong strategy, and the trade war is still doing more damage to America than to China. Rather than doubling down, the Trump administration should use this week's meetings to work toward undoing the damage already inflicted.

Consider what the trade war has done: Instead of resurrecting steelmaking, saving Rust Belt manufacturing from decline, or providing a better deal for the country's farmers, Trump's tariff policies have led to uncertainty and imposed higher costs on American businesses and consumers. Tariffs have caused layoffs at steel plants and lumber mills, triggered declines in both exports and domestic business investment, and drained $34 billion (equivalent to the entire economy of Iceland) out of Americans' wallets and bank accounts.

Equally important is what the trade war has failed to do. Trump promised that hiking tariffs on imports from China would bring manufacturing jobs back to the United States. Wrong. Even though China is feeling some pain from the tariffs, 87 percent of American companies doing business in China plan to stay there—and the ones that are leaving are relocating to places like Mexico and Vietnam. There's virtually no evidence of companies shifting production to the United States. Overall, the U.S. has added about 5,000 manufacturing jobs per month during 2019, well below the rate of 22,000 per month added in 2018.

Trump also promised to reduce America's trade deficit—the difference between the value of goods a country imports from another country and the value of goods it exports to that same country—with China. Most economists agree that there's no need to worry about the size of a trade deficit (for the same reason that you wouldn't worry about running a deficit with your local grocery store), but Trump has been fixated on America's trade deficits since before taking office.

How's that worked out? American exports to China (largely farm goods) have decreased during the trade war, while imports from China have remained relatively flat. The result: The trade deficit widened by 12 percent during 2018, and has grown by another 8 percent so far this year.

As Reason's Peter Suderman put it yesterday: "It's not just that Trump can't be counted on to live up to his word. It's that Trump can't even be counted on to comprehend the promises he's made."

Suderman was talking about a different policy issue—specifically, Trump's claim that he would be able to wipe out the national debt within eight years. In reality, the deficit has grown tremendously under his watch. But the same point is true when it comes to trade. Chinese trade negotiators have little reason to trust Trump at this point, and trust is a necessary precondition for the kind of trade deal the president has promised—one that would completely reshape the relationship between the world's two biggest economies. American voters have little reason to continue trusting (if they ever did) that Trump is capable of hammering out such a deal.

Continuing to escalate the trade war in order to appear "tough on China" would be folly as well. The trade war is hurting China's private sector and empowering greater retrenchment against liberalization, argues Weijian Shan, CEO of a Hong Kong-based private equity firm, in Foreign Affairs.

"China may well agree to commit to purchasing large quantities of U.S. goods as part of a settlement. But such purchases can be made only by the government, not by the private sector," he writes. "The United States should recognize that securing such a commitment would basically compel the Chinese government to remain a large presence in economic affairs. The trade policy of the Trump administration threatens to undermine its own stated objectives."

Beyond that, it makes little sense for Trump to continue punishing American consumers and businesses in order to reach a trade deal with China when a trade deal seems increasingly unreachable. Even if you agree with the goals of the trade war, it's clear the tactics have failed. Besides, continuing the tariff strategy means risking his best argument for his re-election: a strong economy.

NEXT: Today in Supreme Court History: October 10, 2012

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  1. MARKETS IMPLODING!

    1. Why exactly are we trying to open up Chinese markets to American companies by taxing Americans so American companies can bend at the knees of communist China like the NBA?

      1. Because free markets somehow. Even though they really aren’t.

  2. Worst president ever but a very useful idiot.

    1. Cheer up, I’m sure with a little effort he can nationalize a few industries, start 3 or 4 civil wars, murder a few Americans without trial and stagnate economic growth for the next decade like your chocolate messiah.

    2. I don’t agree with “worst president ever” (there have been some truly despicable ones in the past), but yeah, he does seem more like a useful idiot than someone who has malign intent. He reminds me of a Fox News-watching crazy uncle who insists on telling everyone about the latest right-wing conspiracy, over Thanksgiving dinner. (“Did you hear how Hillary personally dragged Seth Rich to Benghazi where he was murdered by Obama’s Muslim Imam? No? That’s because the MSM is lying to you!!!”) You’re not going to talk him out of it, the best that you can do is just grin and bear it. The problem now is that this crazy uncle now has far more power than any crazy uncle ought to have. That is the real scandal with respect to the Ukraine – that the President was using his power to indulge these conspiracy theories. He gets these nutty ideas from Rudy Giuliani – whom Trump believes not because of a preponderance of evidence, but because Giuliani is a loyal Trump man and a fellow New Yorker to boot – and then treats the President of Ukraine like he is some mid-level manager at Trump Tower. (“Hey I heard there was something fishy going on with that Crowdstrike server, would you do me a favor and check it out for me? Kthxbye!”) It’s insulting to him, and it’s just beneath the dignity of the nation for the president to be doing this type of thing.

      1. Gave up on your sock already?

        1. What sock? I don’t have socks, Jesse.

          I’m sure however that you have not given up on your Team Red bootlicking.

          1. You’ve admitted to it multiple times jeffrey. Now you’re going to pretend Palin didnt post child porn too, arent you.

            1. Bear in mind that chemjeff is itself a sock for cytotoxic. He claimed he’d leave if Hillary lost. She did. So he started the chemjeff sock.

              1. He absolutely is. Playa outed him years ago.

                1. Oh good, all of the usual garbage right-wingers are here using the time-tested debate strategy of “it doesn’t have to be true, it just has to go viral”.

                  I’m not cytotoxic, I’m not Playa, I don’t have a sock here, I never have had a sock here.

                  But talking about whether I do or do not have socks is a great way to derail the conversation and to turn it into a gaslighting adventure by the usual trolls around here.

                  1. I’d say you’re a useful idiot, except you’re not useful

                  2. No you don’t have any of those things, just like you didn’t advocate letting foreign sex predators into the US, even though it’s a proven fact that you did.

            2. I’ve never posted as a sock, I have never admitted to posting as a sock, this is straight out lying and gaslighting on your part.

              Go away Jesse, it’s your turn under Senator Hawley’s desk anyway.

          2. Do you have feet? If not, what have you been putting in your mouth all these months?

            1. The cocks of his fellow NAMBLA cell members?

  3. “The economy is doing well enough”

    No. It. Isn’t.

    Koch / Reason libertarianism measures economic health by the fortunes of the 10 richest people in the world. If they’re increasing their net worths, the economy is good; otherwise, it’s bad. And during this #DrumpfRecession, our billionaire benefactor Charles Koch is really struggling. His self-made fortune is stagnating under $60 billion.

    1. What of the ten at the top completely tank, it ten new guys have their collective wealth increase to an even higher collective number?

  4. “Consider what the trade war has done: —”

    The implication is that the sytem / trade we had was somehow free market without penalties – A fallacy @Reason never seems to want to face.
    Instead it almost seems they support the past trade system controlled by an economic treaty as a free market.

    1. Not having to look at the negatives of an argument Boehm wants to make means a lot less work. He doesnt have to look at costs associated with IP theft, trade reductions die to market manipulation, etc. Boehm doesnt want to be a real economist. So he sets his initial assumptions at China has never had a negative effect on trade and goes from there.

      1. Boehm doesnt want to be a real economist. So he sets his initial assumptions at China has never had a negative effect on trade and goes from there.

        I’m coming around to the idea that civil libertarian really just means indecisive coward. When social policy gets tough they become economic libertarians and when economics gets tough they become cultural libertarians and when something socio-economic comes up they make the worst decision possible and then throw a tantrum when more principled and decisive people don’t agree with them.

    2. “A fallacy @Reason never seems to want to face.”

      Pick a subject, from trade, to Section 230, to abortion, there is always a hidden assumption or fallacy that the authors here refuse to address or admit.

    3. Instead it almost seems they support the past trade system controlled by an economic treaty as a free market.

      Silly boy. Reason doesn’t give a flying fuck about free markets. They care about the set of trade policies that will benefit its billionaire sole financial supporter and its wealthy white collar employees. Hence TPP is a triumph of free trade. Meanwhile slowly ending a war is a useless half-measure that must be opposed because it leaves our ‘allies’ in a lurch.

    4. No, they k sort that the status quo was utopia, and should never be altered, ever.

  5. One wonders….are the Red Chinese paying Boehm?

    The fact is, Red China has serially lied, serially cheated and serially stolen American IP. Previous POTUS’ did little or nothing to address this. Those are facts.

    POTUS Trump is now doing something about this. He is making the cost of Red China behavior more and more expensive, as a way to convince them that they should change their malign behavior.

    There is a domestic cost to be paid to make Red China’s behavior to change. As a country, we can choose to ‘take the pain’ and deal with this once and for all, or get run over by a serially lying, serial cheating, serial thieving Red China.

    The economy seems to be doing Ok. The concern is overblown. Frankly, our domestic political issues have much more impact on our economy than this tariff horseshit Boehm peddles.

    1. “..serially stolen American IP…”
      Did you see Chinese Corporations putting guns to American heads here, to perform this theft?
      If Being and-or Ford Motors releases their IP to China (or a Chinese corporation) as part of a swap to get Chinese labor and materials, then it is Ford’s IP and Boeing’s IP. Not yours, not Trump’s, and it shouldn’t belong to the USA collective hive either! If YOU want to provide a better deal than the Chinese Corporations, and provide 10,000 laborers for Ford, WITHOUT demanding IP rights, AND you can give Ford a better “value proposition”, by all means, please do! That’s the free market at work!

      So they don’t play by the exact rules that we’d like them to play by. When you are 15 and your little brother is 5, when you play chess with him, you give up your rook or queen (handicap yourself a wee tad) to let him catch up with your chess skills… If you treasure long-term peace in the family, that is… If you want little brother to get along with you when you are 30 and he is 20, and so on. Or, when you play golf with a business partner, and he sucks at golf, you cut him a few breaks. It’s called “getting along with others”. Do YOU want a shooting war with China? It’s where we’re headed, if The Donald doesn’t stop, and Congress doesn’t take back the powers that belong to Congress!

      Sometimes we need to have the humility to acknowledge that we cannot control others… We can only control ourselves!

      https://en.wikipedia.org/wiki/Economy_of_China
      GDP per capita
      Increase $10,153 (nominal; 2019 est.)
      USA GDP per capita : 59,531.66 USD (2017)
      We are about 6 times as wealthy as they are!!! HOW MUCH MORE per-capita wealth do YOU want to have, compared to the Chinese, before you are willing to be a wee tad less greedy, nationalistic, and selfish? Maybe we should FIGHT a little less, and COOPERATE a wee tad more? And NOT try always to tell others what to do and not do? Be a little less Trump-ish, in other words? I think more cooperation and less competition would be in order here! Trump is flushing the world economy down the crapper, if there’s no stop to the trade wars!

      Really now… HOW MUCH more wealthy, per capita, are we going to have to be, before you’d consent to being more graceful, and not insisting that they play precisely by our rules?

      1. “Did you see Chinese Corporations putting guns to American heads here, to perform this theft?”

        One of the dumbest questions that has ever been asked at Reason. Theft doesn’t have to be under theft of gun you raging lunatic.

        1. Then you tell us how this particular theft is done, Oh Wise One. Stealing source code (literally stealing by hacking links or access) is one thing, we know about that. Are you going to tell me that no one in the USA does these things? That the USA Government Almighty doesn’t do these things?

          I notice that you (like all the other TrumpTard war-mongers) don’t answer my question… HOW MANY times more per capita do we in the USA have to earn, compared to China, before you’d consent to cutting them a break? HOW MUCH of a war-mongering pig are you? … “Blessed are the peacemakers”, Jesus said. It astounds me how many conservative greedy-pig war mongers claim to be Christians!

          1. https://www.hotcars.com/20-chinese-copycat-cars-we-wouldnt-touch-with-a-ten-foot-pole/
            Nobody in the US does anything like this. The ‘copy culture’ of China is straight up IP theft.

        2. Theft doesn’t have to be under theft of gun you raging lunatic.

          Yeah. There seems to be a brand of functionally retarded libertarians that seems to think that if I shout “Hey look! A St. Bernard playing the accordion!” and snatch your driver’s license out of your wallet when you look away, I haven’t stolen anything. Or not anything that real libertarians should care about.

          1. The dastardly yellow-peril slant-eyes have been doing that a LOT lately… Shouting “Hey look! A St. Bernard playing the accordion!” and snatching all of our shit! So yes, it’s a real problem!

            Thanks for pointing that out to us!

    2. Perhaps the state shouldn’t be substituting its moral judgment for that of each individual.

      Perhaps it’s not the state’s job to be deciding for EVERYONE the terms by which individuals ought to trade with each other between foreign nations.

      You don’t want to do business with Chinese companies? Then good for you. Don’t do business with them. But don’t use state coercion to FORCE me to not do business with them.

      1. Jesse christ you’re an ignorant fuck. If you choose to by goods from a thief that is robbing the producer of said good, you are choosing to.increasw the costs to consumers seeking legal purchases of the good. How are you so fucking ignorant.

        Chinas theft of IP increases the costs per item of goods bought legally by the developer who created the good initially as R&D is spread over less goods sold, increasing cost per item. It also reduces future investments in product creation. All so you can buy something stolen more cheaply. You’re a fucking idiot baby jeffrey.

        1. Some of that “theft” is willingly giving up their IP for access to the Chinese market. It is a market transaction, I give you something I value for something you value. I’d love to see the actual numbers on theft vs voluntary tech transfers but every time I look they are jumbled up together.

          Also go to Congress if you want tariffs the branch expressly given the authority to levy them by our Constitution. Unless your willing to except them when some left winger gets elected and issues a carbon tariff by EO.

          1. Some of that “theft” is willingly giving up their IP for access to the Chinese market. It is a market transaction, I give you something I value for something you value.

            That may be true, Notion. It does not excuse ‘most’ theft. That aside, as a moral proposition, we cannot tolerate serial lying, cheating or theft. The failure to address it enables it. And this has been shown to be the case, historically.

            1. Do you know what the breakdown is? I suspect most of the theft is the voluntary ip transfers and that is why they lump them together to make the numbers look worse. Like how the gun grabbers lump suicide into gun deaths to “strengthen” their argument for gun control.

              1. Notion, I am not sure that number is truly ‘knowable’ = exact breakdown between theft and ‘voluntary’ transactions. I am not dodging the question, but I just do not know that answer. I see different studies tallying the cost to America in different ways.

                Regardless, the problem of Red China’s serial lying, cheating and theft must be addressed. POTUS Trump is doing just that.

              2. ” I suspect”

                Cool, but useless.

            2. That aside, as a moral proposition, we cannot tolerate serial lying, cheating or theft.

              And if it’s your sincere moral belief that Red China is serially lying cheating and stealing, and therefore you cannot support commerce with China, then by all means, act on that sincere moral belief to your heart’s content.

              But what you shouldn’t do is COERCE everyone else to do the same.

              1. One option: Not sell a single pound of pork to Red China. Then watch what happens. 🙂

                  1. Red China has a pork problem. And a very big one. No, not stupid and wasteful spendinmg. But a real food problem. Roughly half of their swine herds have died. They now need to import north of 400K tons of pork to meet domestic demand.

                    The US could simply refuse to sell pork to them. Hungry people make for political unrest.

          2. I still argue that if a company willingly gives their IP to China, then all trademarks they have for that tech are nullified and it is ALL public domain.

            Why should we spend a penny enforcing protections they happily eschew?

            1. Because “we” (or the USA government) aren’t a party to the agreement, you Buttinsky Nosenheimer you! You told (sold) your secret to Irma, so I am now free to listen in on you and tell EVERYONE your secret? Does this strike you as “fair”?

              1. Absolutely. If the secret isn’t important for YOU to keep secret, it sure as fuck isn’t important enough to ME to keep secret.

                You get protections only if you protect the IP. If you give it up for business reasons, well, sucks to be you. You should plan ahead better next time and not do something stupid.

    3. There is a key difference between a whore and a slut.
      A whore gets paid

      1. So all of you conservatives who LOVE the Trumptatorship here on this forum…

        Are you Trump sluts or Trump whores?

        1. You have some shit in your teeth.

  6. This article is all very good and well, but it runs contrary to Our Proud Nation’s newest policies of Nationalistic-Sadistic Dirt-doing Against Potential-enemies (NSDAP). Under Nationalism-Sadism, it is ALL about PUNISHING other, non-American nations! Even at the price of punishing ourselves! And ALL of that them thar non-American nations ARE our potential enemies, so they must ALL be punished!

    1. Tariffs are terrible except when they are imposed upon American goods by literally every country on the face of the earth, including every EU nation and, ironically enough, China.

      As you can see from the comparative GDP growth of China and the USA, tariffs clearly don’t work. The country that imposes tariffs always loses.

      1. And obviously the Chinese government’s refusal to abandon protectionism means that they are simply too foolish and backward to understand how business works, so we must show them the error of their ways by allowing them to continue this practice and making American businesses struggle.

    2. I see, you still cling to the idiotic, uninformed notion that (1) we are engaging in a trade war with China because we are xenophobic, and (2) this is “hurting” us.

      Look, when you grow up and learn about economics and politics, instead of making up juvenile acronyms, we can have a discussion. Now stop jerking off and go out and play with your little friends.

      1. Reason.com has about ten billion web pages posted by now, giving, in great detail, HOW and WHY the trade wars are hurting us. And you ignore them all, do not refute them with real data or real facts, and then you call me idiotic for believing that trade wars hurt the American consumers, and workers? What planet do you live on?

        If trade wars are good, every on of the 50 states in the USA should declare trade wars on every other state… And then county on county, city on city, and finally, SQRLSY One’s household should trade with NO ONE… Good jobs ONLY for residents of SQRLSY One’s household!!! No one else DESERVES to trade with me!!! I will do my own iron ore mining, smelting, tool manufacture, food growing, cloth weaving, home dentistry, you name it… It is actually a straight-line ticket to utter poverty!!!

        Moron!

  7. To think if our dear unindicted co-conspirator had been president in the 1980s we could have trade warred with Japan and the Soviet Union would have made it.

    1. The three biggest retards at Reason sure flocked to this article quickly. Too bad most of you stopped at freshman level economics like Boehm did.

    2. This seems unbelievably retarded. The great rival of the US is China today. Trading with the Soviets like we do with the Chinese would have been dumb on our part.

  8. New strategy… quit pitching and go back to catching?

  9. “Just give China what they want!”, shrieked Boehm, “If we cave to all of their demands they might be merciful to us and not try to destroy our economy. Glorious Premier Pooh is our friend.”

    1. Glorious Premier Pooh will become our intractable enemy if we treat him like one. Welcome to the world of self-fulfilling prophecies! You want friends? Treat people like friends! You want enemies? Treat people like enemies!

      Did you not know this? Did you fall off of the turnip truck yesterday?

  10. Trump should change his tactics.

    Cut China off ENTIRELY. Nothing to them. Nothing from them. Our trade with them has harmed us and helped them. We now have expression limited to avoid offending them. Fuck that noise.

    Will it be rough? Temporarily. We can handle it infinitely better than China can, though.

    1. I’m in favor of this more or less. Tell the Chinese they can buy food and a couple of other non-tech items from us if they wish, but cut off all other trade completely.

    2. A problem with this is the costs. China doesn’t have the regulations we have so things like plastics made there are extremely cheap. Even if the product you buy wasn’t made in China there is a good chance what’s inside was. Include labor in that as well. Companies don’t want to hire those in the US because they want a lot of money. Not sure what to do about this.
      Maybe if your company employs a certain amount of Americans you don’t pay taxes? It increases jobs and those you employ pay taxes. States do that with minimum wage. They raise minimum wage and then scrape the increase in taxes instead of raising them.

    3. Gee, that’s not authoritarian at all.

  11. The economy is doing well enough—except for all the sectors hurt by the trade war.

    The economy is doing well in the same sense that a methamphetamine addict who’s been awake for 96 hours straight is doing well.

    The trade war is hurting the economy, just like any real war would. Just like any real war, there are considerations other than economics for why you engage in them.

    1. October.10.2019 at 1:06 pm
      I see, you still cling to the idiotic, uninformed notion that (1) we are engaging in a trade war with China because we are xenophobic, and (2) this is “hurting” us.

      Is it hurting us, per your above post, or is it idiotic to believe that it is hurting us, per your older post? Do you admit that some of your posts are idiotic, then? Or do you have schizophrenia? Get it treated, it is dangerous!

  12. You know what, screw China. They steal our intellectual property and exert control on US companies who has the temerity to say ‘boo’ against them. Every agreement imports their shitty police state.

    1. By willing sellers in the USA selling things freely to China, we import their police state? I buy a plastic toy from China, I import their police state? How does this work? Is this magic? Is this part of your religion? What is your religion, worship of Government Almighty?

      Scienfoology Song… GAWD = Government Almighty’s Wrath Delivers

      Government loves me, This I know,
      For the Government tells me so,
      Little ones to GAWD belong,
      We are weak, but GAWD is strong!
      Yes, Guv-Mint loves me!
      Yes, Guv-Mint loves me!
      Yes, Guv-Mint loves me!
      My Nannies tell me so!

      GAWD does love me, yes indeed,
      Keeps me safe, and gives me feed,
      Shelters me from bad drugs and weed,
      And gives me all that I might need!
      Yes, Guv-Mint loves me!
      Yes, Guv-Mint loves me!
      Yes, Guv-Mint loves me!
      My Nannies tell me so!

      DEA, CIA, KGB,
      Our protectors, they will be,
      FBI, TSA, and FDA,
      With us, astride us, in every way!
      Yes, Guv-Mint loves me!
      Yes, Guv-Mint loves me!
      Yes, Guv-Mint loves me!
      My Nannies tell me so!

      1. Cool story bro.
        Because if they see an employee of a company do business with tweet about Taiwan, they tell the company to fire said employee. By agreeing to do business with them, we are agreeing to perpetuate their propaganda. Toe the line or go out of business. That’s how, dum dum. I am saying to not voluntarily do business with someone who charges both money and freedom of speech for their price.

  13. Hand-wringing propaganda pieces pretending the Smoot-Hawley tariff (NOT Prohibition, the income tax and the 5&10 Law) caused the 1929 Crash and their modern mendacious counterparts have what in common? NO FIGURES! Where is there mention of before and after tariff schedule changes on specific items? Yet the Constitutional revenue-only tariff funded the government before Marx was even born! The 1972 LP platform clearly demanded repeal of the individual income tax, remember?

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