Tariffs: The Real Culprit Is China

The U.S. steel and aluminum industries really have been devastated by unfair competition from China.

China has begun closing some of its steel mills under international pressure.  Nevertheless, its production capacity remains twice as high as it was in 2006.

Trump and his advisers are correct that economic strength is a matter of national security.  Furthermore, right now China plays that game much more effectively than the U.S. does.  China routinely forces foreign companies to turn over their intellectual property as the price for doing business in the country.  IP is often the crown jewels of any corporation.

The Made in China 2025 project aims to develop domestic sources for a wide array of advanced technologies. 

Their goal is to reduce China’s dependence on potential adversaries such as the U.S. and Japan. The 2018 National Defense Strategy document prepared by the Pentagon accuses China and Russia of “undermining the international order from within.”

It’s important to credit Trump on these points.  Many commentators have incorrectly dismissed his promise of metals tariffs as nothing more than a play for votes or an eruption of machismo.  They may be that, but they’re not only that.  None other than Michael Froman, who was President Obama’s chief trade negotiator and is no friend of Trump’s, said on Feb. 5: “It is in our national interest to have a strong steel and aluminum industry domestically.”

The mistake is that Trump has made the U.S., rather than China, the focus of the world’s opprobrium. 

Citing national security as a justification for the metals tariffs will give other countries the excuse to do the same.  And this would tear a hole in the delicate web of trade agreements the U.S. has spent decades spinning.  In addition, applying the tariffs to all countries, as he has threatened to do, would weaken the united front of American trading partners.  This at a time when it is needed to confront China and get it to change its behavior.

Suddenly we’re discussing possible trade wars between the U.S. and some of its most reliable allies.  European Commission President Jean-Claude Juncker adopted some of Trump’s bravado in a talk in Germany on March 2. “We will now impose tariffs on motorcycles, Harley-Davidson, on blue jeans, Levi’s, on bourbon. We can also do stupid.

Trump, of course, fired back on Twitter that if Europe retaliated, the U.S. would counter-retaliate with tariffs on auto imports.

The spectacle of Western leaders attempting to out-stupid each other plays into China’s hands.  This may explain why its officials have stayed relatively quiet.  Liu He, a high-level emissary of President Xi Jinping, has kept a low profile on a visit to Washington.  He called for cooperation.  As Napoleon is supposed to have said: Never interrupt an opponent who is making a wrong decision.

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