Taking on China

Yesterday, President Trump said the following about how he was “taking on” China in relation to its trade policy:

But one thing I have to do is economically take on China because China has been ripping us off for many years. President Clinton, President Bush, and President Obama, and others should have done this long before me. My life would be much easier — although I enjoy doing it — but my life would be much easier if I just said, “Let China continue to rip off the United States.” All right? It would be much easier, but I can’t do that.


We are winning against China. They’ve lost two and a half million jobs in a very short period of time. They want to make a deal. It’s got to be a deal that’s good for the United States, where they want to make a deal — probably, we will make a deal.


But if I didn’t do that — and I’m not doing this — somebody said it’s Trump’s trade war. This isn’t my trade war. This is a trade war that should have taken place a long time ago by a lot of other Presidents.


Over the last five or six years, China has made $500 billion. $500 billion. Ripped it out of the United States. And not only that — if you take a look, intellectual property theft. Add that to it. And add a lot of other things to it. So somebody — 


Q (Inaudible.)


THE PRESIDENT: Excuse me. Somebody had to do it. I am the chosen one. Somebody had to do it. So I’m taking on China. I’m taking on China on trade. And you know what? We’re winning. Because we’re the piggybank. We’re the one that all these countries — including the European Union — wants to rob and takes advantage of. European Union — $200 billion. China — more than $500 billion. Sorry.


Q So it sounds like a recession is worth it — 


THE PRESIDENT: I was put here — 


Q — is that what you’re saying?


THE PRESIDENT: I was put here by people — I was put here by people to do a great job. And that’s what I’m doing. And nobody has done a job like I’ve done.


Now, would China rather wait for a little more than a year and try and get Sleepy Joe Biden to negotiate with, instead of President Trump? Maybe. But I don’t think so. You know why? They’re losing too many jobs too fast. They had the worst year in 27 years, but I think it was actually 52 or 54 years. It’s the worst year they’ve had in a half a century. And that’s because of me. And I’m not proud of that. But you know what? They want to negotiate.


And Sleepy Joe doesn’t have a clue. Sleepy Joe said, “Oh, China is wonderful.” Well, China is wonderful for China. But I’m wonderful for the U.S.A.

The transcript does not quite do this justice. It’s worth watching the video.


Putting aside the inaccurate description of the U.S. trade balance with China (they are not “ripping us off,” we are simply trading with them), is President Trump “taking on” China? It depends what you mean by that. If you mean, is President Trump taking actions that could induce China to reduce its protectionism, to protect intellectual property better, and to let foreign companies invest in China without transferring technology to their Chinese partners, then I’m not sure he is. The Trump administration has imposed tariffs on Chinese imports in a way that has led to China retaliating with tariffs of its own. But there hasn’t been much indication so far that a deal to address China’s bad practicies is in sight. We may just end up with higher tariffs that stay in place as long as Trump is president.


Instead of public bluster and an arbitrary use of tariffs, the better approach would be to negotiate in the normal way, which often results in trade liberalization. We make some demands and offer some concessions, and the other side does the same. Why didn’t that happen under previous administrations? It’s hard to say for sure, but it’s possible that one reason it didn’t happen under President Bush is that we were so distracted by the mess in the Middle East that China was overlooked. President Obama “pivoted to Asia,” and as part of that negotiated the Trans Pacific Partnership, which could have put pressure on China by excluding it from the TPP’s trade liberalization and thus leaving it at a disadvantage. But Trump withdrew from the TPP.


So here we are. Right now, the Trump administration looks like it favors tariffs over negotiated trade liberalization. The main Democratic contenders for the 2020 election have not said enough to get a sense of how they would approach trade policy in relation to China, although some have expressed skepticism about at least some of Trump’s tariffs. It would be nice if someone would eventually “take on” China, in the sense of adopting an approach to trade policy that encourages China to liberalize.