Trade Policy

September 19, 2019 4:05PM

Justice Department Responds in Steel Tariffs Case

The Justice Department today filed its brief in American Institute for International Steel v. United States before the U.S. Court of Appeals for the Federal Circuit. At issue are President Trump’s steel tariffs. Last month, the Cato Institute filed a brief in support of the appellants, who are businesses that rely on imported steel and have been harmed by the tariffs. 

The government’s response brief, alas, is excellent.

Faced with arguments that the president is unbound, the government points to putative procedural rigor behind the tariffs. In response to arguments that the Constitution empowers Congress—not the president—to regulate foreign commerce, the government stresses the president’s executive authority over foreign affairs. Quite obviously, the Justice Department's brief reflects the work of skilled lawyers.  

Notably, Cato’s brief seems to have registered with the government. On the one hand, the government dismisses Cato's input altogether. In the brief’s first footnote (page 15), the Justice Department alleges that we tried to “expand the issues of the appeal beyond those presented by the appellant in its opening brief,” and, therefore, that the court should not pay attention to our arguments. Notwithstanding this footnote, the government references the Cato Institute by name in the body of the brief and, furthermore, spends an entire subsection (III.B) addressing Cato’s arguments about judicial oversight.

Here, I'd be remiss if I failed to rebut the government's incorrect charge that Cato improperly attempted to expand the scope of the appeal before the Federal Circuit. In a nutshell, Cato's brief demonstrates that the trial court mistakenly denied itself the authority to review the president's steel tariffs. Because all federal courts always have jurisdiction to determine the bounds of their own jurisdiction, Cato's contribution falls squarely within the proper purpose of a friend-of-the-court brief. In its amicus brief, moreover, Cato argues that if judicial review is unavailable, then there can be no "intelligible principle" to limit the president's actions, which is precisely what the appellants claim. Of course, the best evidence for the appropriateness of Cato's brief is the fact that the government spent so many words engaging with Cato’s arguments. It doesn't make much sense for the government to say that we should be ignored, but then to respond to us. As always, actions speak louder than words. 

August 30, 2019 3:22PM

How a Footnote in the USMCA Undermines Economic Liberty

House Democrats are holding up ratification of the U.S.-Mexico-Canada Agreement (USMCA) until U.S. Trade Representative Robert Lighthizer agrees to make some changes.  While a number of the big concerns about the new NAFTA, such as enforcement, biologic drugs, and the implementation of Mexico’s labor laws have received a lot of attention, there is another issue that has flown under the radar, perhaps in part because it’s buried in a footnote.

Chapter 7 of the USMCA, “Customs Administration and Trade Facilitation,” includes a section on “Express Shipments.”  These are goods of low or negligible value that are shipped by courier or express mail services in large volume. Think about that pair of shoes you just ordered from France. That’s an express shipment.

Because there are so many of these packages coming through customs facilities, and it’s such a burden to process them, most countries have what is called a de minimis threshold, that is a set value below which imported goods are both sales tax and duty free. The United States has the highest de minimis threshold in the world, allowing individuals and businesses to make purchases from abroad up to $800 with no duty or tax collected by customs. As Gary Hufbauer, Euijin Jung, and Lucy Lu explain, high de minimis thresholds are not only good for consumers, who do not have to deal with the complexity and time delays in processing customs duties and sales tax on the things they buy, but also for small businesses, because of the importance of intermediate inputs, as well as cross-border sales for their profits.

As part of the USMCA, Canada and Mexico both raised their de minimis thresholds, which not only helps small businesses in the United States but also consumers in both countries as well.  Canada raised its de minimis threshold to $150 CAD from its original $20 CAD limit, and sales tax cannot be collected until the value of the product reaches at least $40 CAD. Mexico increased its de minimis from $50 USD to $100 USD, with tax free de minimis on $50 USD.

While the U.S. did not alter its de minimis threshold in USMCA, there is a curious footnote in Chapter 7 that should be cause for concern. It reads:

Notwithstanding the amounts set out under this subparagraph, a Party may impose a reciprocal amount that is lower for shipments from another Party if the amount provided for under that other Party’s law is lower than that of the Party.

Now we are all well aware of this administration’s distorted concept of reciprocity, and they seem to be applying it here as well. What this footnote suggests is that the U.S. could potentially lower its de minimis threshold to match what Canada or Mexico have agreed to. To put this in perspective, in 2016, the United States increased its de minimis level to $800 from $200. This footnote would allow the de minimis to drop even below the 2016 limit. This is not only an attack on economic liberty for American citizens, but it would be an enormous step backward on a policy where the United States has been a leader for liberalization.

Back in June, Robert Lighthizer was directly asked about this footnote by multiple members of the House Ways and Means Committee during a hearing on the 2019 trade policy agenda. While a number of excellent questions were raised, I highlight two below. First, Rep. David Schweikert (R-AZ), noting bipartisan support for the current de minimis threshold, stated:

In 2016, Congress raised the U.S. de minimis threshold to $800 in the bipartisan Trade Facilitation and Trade Enforcement Act. This change enjoys wide bipartisan support in Congress and throughout the e-commerce landscape. The current threshold benefits millions of American small businesses, across all sectors, including manufacturers, who rely on low-value inputs for the production of U.S. exports. As a result, American small businesses now enjoy more rapid border clearance, reduced complexities and red tape, and lower logistics costs, while American consumers benefit through faster, less expensive access to a wider range of goods.

Given the benefits of the current de minimis threshold to American small businesses and the U.S. economy as a whole, and that Congress legislated on the U.S. de minimis level only a few years ago, I remain extremely concerned over the Draft Statement of Administrative Action (SAA) on the U.S.- Mexico-Canada Agreement (USMCA) transmitted to Congress on May 30. This draft SAA includes language suggesting that you may seek changes to the U.S. de minimis threshold through the USMCA implementing bill. As you know, last December, Rep. Kind and I led a bipartisan letter urging you not to seek to lower the U.S. de minimis threshold. My position has not changed. I strongly oppose including any language in the USMCA implementing bill that would lower the U.S. de minimis level or that would delegate this authority to the Executive Branch. As you work with Congress to finalize the USMCA implementing legislation, will you commit to not seeking authority to lower the U.S. de minimis threshold?

Rep. Daniel Kildee (D-MI) also emphasized how this change would undermine Congress’s authority to regulate commerce:

In 2016, Congress raised the U.S. de minimis threshold to $800 in the bipartisan Trade Facilitation and Trade Enforcement Act. The current threshold benefits millions of American small businesses, across all sectors, including manufacturers, who rely on low-value inputs for the production of U.S. exports. As a result, American small businesses now enjoy more rapid border clearance, reduced complexities and red tape, and lower logistics costs, while American consumers benefit through faster, less expensive access to a wider range of goods.

Given the benefits of the current de minimis threshold to American small businesses and the U.S. economy as a whole, I was curious to see the Draft Statement of Administrative Action on the U.S. Mexico Canada (USMCA) includes language that you may seek authority for the Executive Branch to set U.S. de minimis thresholds. Congress must maintain its Constitutional authority to set tariffs – including de minimis thresholds.

As you work with Congress to finalize the USMCA implementing legislation, can you commit not to seek the derogation or authority to derogate from the current U.S. de minimis threshold?

Amb. Lighthizer’s comments to all questions on the de minimis threshold remained the same:

As noted in the Administration’s submission to Congress on changes to existing law and the draft Statement of Administrative Action, we identified this as an issue for consultation with the Committee on Ways and Means of the House and the Committee on Finance of the Senate. These consultations are underway. I look forward to continuing those conversations with you and other Members on this important issue.

Congress should continue to press the administration for the removal of this footnote from the USMCA. It may seem like a small part of the broader USMCA debate, but Congress should not be fooled. This is representative of the broader attempts by the executive branch under this administration to expand its power into areas where the Constitution gives Congress express authority. Congress should not give up its authority to regulate foreign commerce, and should actively push to rein in the abuses of the executive in trade policy. By pushing for this on de minimis, we can get one step closer to ensuring that the Trump administration’s trade policy remains as its own small footnote in the history of U.S. trade policy.

August 27, 2019 4:14PM

Trump’s Emergency Economic Powers: “Case Closed”?

On the campaign trail a few years back, Hillary Clinton declaimed: “We need a president who is ready on Day 1 to be commander in chief of our economy.” We got a good laugh out of that here at Cato—what a megalomaniacal misconception of the job! When President Trump embraced the role last Friday, it somehow seemed less amusing. “Our great American companies are hereby ordered to immediately start looking for an alternative to China,” he brayed, sending the markets into a Twitter-driven tailspin

Media Name: hereby_ordered.png

Where does Trump derive the authority for that “order”? On Saturday, he followed up with a statutory citation for the haters: “try looking at the Emergency Economic Powers Act of 1977. Case closed!” 

True, President Trump makes a lot of crazy threats he never carries out: from revoking birthright citizenship, to closing the border, to using the same 1977 Act to hammer Mexico with across-the-board tariffs, as Trump threatened to do in May. There’s a pattern here: the president sounds his barbaric yawp over the roofs of the world, but before long, backs it down to an ineffectual grumble. In this case, the cycle took all of two days: “I have the right to, if I want,” Trump insisted Sunday, but “I have no plan right now. Actually, we’re getting along very well with China.” OK, then: never mind! 

But we’d be fools to shrug this episode off as another unsettling, but ultimately meaningless Trumpian brainspasm, like nuking hurricanes or buying Greenland. For decades now, Congress has defined national emergencies downwards, investing the executive branch with dangerous new powers the president can trigger by saying the magic words. Trump has only begun to explore the possibilities, and there may be more competent would-be authoritarians waiting in the wings.

The statute Trump specified, the International Emergency Economic Powers Act of 1977 (IEEPA), gives the president an imposing array of unilateral powers to deploy against “any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States” if he “declares a national emergency with respect to such threat.” Granted, Trump’s definition of “emergency” may differ from yours, mine, and the dictionary’s. “For many years, this has been going on,” he explained Sunday, “in many ways, that’s an emergency.” But if history is any guide, federal judges will be extremely reluctant to second-guess “the wisdom of the President's judgment concerning the nature and extent of [the] threat.”

So, “case closed”? Could Trump order U.S. companies to pack up and come home? Not quite; but he could make it extremely difficult for them to do business in and with China. The IEEPA gives the president staggeringly broad powers to block transactions and freeze assets in which any foreign government or foreign national has an interest. And Trump’s not wrong to think he might get away with using the law as a trade-war bludgeon. A Congressional Research Service report published two months before Trump first started threatening to use IEEPA to hike tariffs, opined that such a use was unlikely, but probably permissible.  

The National Emergencies Act of 1976, the framework statute that was supposed to rein in presidential emergency powers, won’t be much help either. It originally allowed Congress to terminate presidential emergencies by majority vote, but thanks to a 1983 Supreme Court decision, the law now requires termination via joint resolution, subject to the president’s veto. Under the current emergency-powers regime, then, the president gets to do what he wants unless a congressional supermajority can be assembled to stop him. 

The good news is that Trump’s norm-busting on emergency powers has spurred a bipartisan reform effort in Congress. On July 24, the Senate Homeland Security and Governmental Affairs Committee moved an important emergency-powers reform bill forward by an 11-2 majority. That bill, Senator Mike Lee’s (R-Utah) ARTICLE ONE Act, would amend the National Emergencies Act to void new emergency declarations within 30 days unless Congress affirmatively approves them. Once approved, new emergency declarations require annual reapproval by Congress. The A-1 Act thus changes the current default setting—the president proposes, and the president disposes—to one in which any emergency edicts he issues rapidly expire without legislative sanction.    

The A-1 Act also addresses IEEPA abuse: thanks to an amendment offered by Senator Tom Carper (D-DE) and approved by voice vote, it would restrict the president’s ability to use the 1977 law to hike tariffs. The IEEPA, it clarifies, “does not include the authority to impose duties or tariff-rate quotas or… other quotas on articles entering the United States.”  

That’s an important change, but it comes with a pretty significant exception: even under the Carper amendment, the president can use the IEEPA for blanket bans of “all articles, or all of a certain type of article, imported from a country from entering the United States.” Nor would authorities claimed under the IEEPA sunset 30 days after the declared emergency. The A-1 Act exempts IEEPA emergencies from the new framework; they remain renewable at-will by the president unless affirmatively repealed by Congress over the president’s veto. 

All but three of the 34 currently active national “emergencies” rest on the 1977 law. The case for an IEEPA carve-out is that the bulk of those 31 are fairly uncontroversial, and requiring yearly congressional reapprovals would be cumbersome. That case was far more compelling before President Trump started threatening to weaponize IEEPA against major trading partners and the American consumer. 

Even so, the ARTICLE ONE Act would constitute a major improvement over the current emergency powers regime, and a possible foundation for future reforms. The courts are unlikely by themselves to impose the necessary restraints. It’s Congress that got us into this mess, and it’s going to be up to Congress to get us out. 

August 27, 2019 11:46AM

Trump’s Trade Policy So Far: Too Many Trade Wars, Very Little Trade Liberalization

This past week was an eventful one for trade policy, and not in a good way. In the trade world these days, no news is good news, and any tweets are probably bad news. President Trump's trade policy has been stridently protectionist, abusive of the constitutional separation of powers, destructive to U.S. alliances, and fundamentally flawed as a strategy to achieve its stated goals.

Last week, President Trump was agitated by China's retaliatory tariffs (which were in response to tariffs previously imposed by the Trump administration), and in reaction to the Chinese retaliation, Trump announced on Twitter some retaliation for the retaliation, this time bumping up the various existing and promised tariffs by 5 percentage points. In doing so, he escalated a trade war that has been quickly spiraling out of control. By the end of 2019, if all tariff threats are implemented as planned, the vast majority of Chinese imports to the United States and U.S. exports to China will be subject to tariffs. And not just the low tariffs which had become the norm in recent years: the Chinese imports in question will be subject to tariffs of either 15% or 30%, which is a significant tax. American importers, retailers, producers, and consumers will feel the effects.

Beyond tariffs, Trump made the following over-the-top, anti-free market demand in relation to China: "Our great American companies are hereby ordered to immediately start looking for an alternative to China, … ." That sounds borderline authoritarian as well as extremely harmful to the U.S. companies operating in and selling products in China (ceding the Chinese market to European and Japanese competitors makes no sense). How could Trump possibly have the power to do such a thing? There is, in fact, a statute that gives the president emergency powers that might be broad enough for this executive power grab, but of course it is subject to judicial and legislative oversight. One would hope that those co-equal partners in the U.S. government would play their role and prevent a president from executing such an order.

Trump's defenders will say that a trade war has been going on with China for years and that Trump is the one who finally had the courage to fight back. It is true that the best defense of Trump's approach to trade is that China really does engage in bad trade practices (such as high tariffs and subsidies, and a failure to protect intellectual property). Unfortunately, the Trump administration's aggressive trade policy is not focused only on China. The administration has been abusing the power Congress delegated to the president over the years and is targeting just about every major U.S. trading partner (and when it does take on China it does not do so very effectively)

With regard to the role of Congress, Article I, Section 8 of the Constitution gives Congress power over customs duties and regulating commerce with foreign nations. Over the years, however, Congress has delegated a fair amount of this power to the president. Most presidents have used the power to focus on signing trade agreements that promoted trade with other countries, through mutual tariff reductions and other forms of liberalization. By contrast, President Trump has done very little of this. His negotiations with other countries have mostly focused on reopening old trade deals in order to make trade less free; and he has invoked a statute, rarely used in recent years, that gives him the power to impose tariffs on the basis of "national security" considerations, even in industries where such concerns have little basis. In this way, with regard to domestic trade practices, Trump has pushed the United States in a far more protectionist direction than anything seen since the 1930 Smoot-Hawley tariffs

The results have been clear and unsurprising: Higher costs for consumers. A number of studies have come out showing that most of the costs of the tariffs are being borne by U.S. consumers (either ordinary purchasers or businesses who use imported goods as inputs in their own manufacturing). 

The domestic trade policy disruption also has an impact on international affairs, as our trading partners are being hurt too. The Trump administration has imposed tariffs and quotas on steel and aluminum imports from most trading partners (in response to which, many of these partners have retaliated with tariffs of their own); and it has threatened tariffs on imports of automobile imports, which would be a massive tax imposed on U.S. consumers. These actions, along with Trump's attacks on the World Trade Organization, have made our allies less likely to work with us in the effort to push China to liberalize.

The Trump administration has offered up the explanation that the U.S. tariffs are necessary in order to negotiate trade liberalizing deals with these countries. But that logic is undermined by all the deals negotiated by past administrations without such tariff threats, as well as the continued failure of the administration to achieve new liberalization. Any tiny bits of liberalization on the part of foreign governments (e.g., through the renegotiated NAFTA, or a talked about U.S-Japan trade deal), are dwarfed by what was negotiated by the Obama administration through the Trans Pacific Partnership, from which Trump withdrew rather than look for a path for it to be passed by Congress.

Trump's misguided approach to trade policy may be based on a number of factors, and it is difficult to get into his head fully. It is worth noting, however, that he has called himself a "tariff man." Perhaps that is all the explanation we need. An additional factor is almost certainly his misunderstanding of the concept of trade deficits. When Trump sees that the United States has a trade deficit with a country, he automatically thinks that the United States is "losing." But that is not how trade works. The trade balance is not a scorecard, and having a trade deficit with a country does not mean you are losing to them.

There was a point where Trump and his trade advisers suggested he wanted a world with "zero tariffs, zero barriers, zero subsidies." That statement seemed like a fantasy at the time, and the ensuing months have proved it to be clearly false. Tariffs continue to climb, and massive farm subsidies have been authorized to bail out the farmers hurt by Trump's trade war.  We are in the midst of what feels like a "forever trade war." Cooler heads are sure to prevail some day, but how much damage will be done in the meantime?

August 26, 2019 3:27PM

An Opportunity for Trump to Lead on Jones Act Reform

President Donald Trump and U.K. Prime Minister Boris Johnson met on the sidelines of the G7 summit this weekend, and among the issues discussed was a possible U.S.-U.K. free trade agreement. In public remarks Johnson made clear his desire that such a deal include cabotage privileges for U.K.-flagged ships:

PRESIDENT TRUMP:  We’re having very good trade talks between the UK and ourselves.  We’re going to do a very big trade deal — bigger than we’ve ever had with the UK.

And now, they won’t have it.  At some point, they won’t have the obstacle of — they won’t have the anchor around their ankle, because that’s what they had.  So, we’re going to have some very good trade talks and big numbers.

PRIME MINISTER JOHNSON:  Talking of the anchor — talking of the anchor, Donald, what we want is for our ships to be able to take freight, say, from New York to Boston, which at the moment they can’t do.  So, we want cabotage.  How about that?

PRESIDENT TRUMP:  Many things — many things we’re talking about.

PRIME MINISTER JOHNSON:  That would be a good thing.

Preventing British ships from transporting goods between two U.S. ports is the Jones Act. Passed in 1920, the law restricts domestic waterborne transport to vessels meeting four conditions: they must be U.S.-built, U.S.-flagged, at least 75 percent U.S.-owned, and at least 75 percent U.S.-crewed.

Given Johnson's comments, it seems likely that British trade negotiators will seek an exemption from this law for U.K.-flagged ships. If granted, their U.S. counterparts will surely demand the removal of various trade barriers to the $2.6 trillion U.K. economy. For Americans this would be an economic twofer, providing them access to a wider range of transport options as well as expanded export opportunities.

Unfortunately, history does not augur in favor of such an outcome. When presented with demands for Jones Act relief U.S. trade negotiators have invariably refused to cede even an inch of ground—an intransigence which reflects the power of the lobbyists who back the law. Indeed, during bilateral trade negotiations with Canada in the 1980s the Jones Act lobby was able to persuade more than half the members of the Senate and House to sign resolutions declaring the Jones Act off the table.

But there was a price to be paid. Not only were Americans denied the ability to use Canadian vessels for domestic transport but—as a former Canadian diplomat points out—the Jones Act was used as a means to deflect from areas where Canadians were loath to part with their own protectionist policies:

Mackay

Americans are still paying the price for Jones Act protectionism. Continued U.S. obstinacy over the law in trade negotiations is undoubtedly met with corresponding moves from its negotiating partners. That’s how the game is played.

During talks that eventually resulted in the U.S.-South Korea free trade agreement, for example, South Korea—home to one of the world’s largest shipbuilding industries—no doubt raised the issue of the Jones Act’s U.S.-build requirement. U.S. negotiators did not accommodate them, and it’s a safe assumption that barriers to the South Korean economy which otherwise could have been removed were left in place (rice, which was specifically excluded from the deal by South Korea, seems one strong possibility).   

This is just another one of the myriad ways in which the Jones Act harms the United States. These harms include: higher transportation costsincreased congestion and highway maintenance costs; more pollution; the inability of Americans to buy U.S. products; and increased barriers to U.S. exports from our trading partners. The tally from these various costs is surely dizzying.

Boris Johnson has done President Trump a favor. With the Jones Act now on the negotiating table, an opportunity has been presented to expand economic freedom at home and increase export opportunities for U.S. businesses abroad. It's one that Trump should seize.

August 23, 2019 12:10PM

For More U.S.-Flag Ships, Lift the Domestic‐​Build Requirement

Cape Ray

Maritime Administrator Mark Buzby has a problem. As head of the Maritime Administration he is charged with crewing and operating the Ready Reserve Force (RRF), a government-owned fleet used for the rapid deployment of U.S. military forces. Speaking at a Navy League-sponsored breakfast earlier this week, however, Buzby expressed worry there aren’t enough mariners to operate these ships. The RRF, while used in a military role, relies upon civilian mariners to operate them in wartime scenarios. And those mariners are in short supply.

In fact, a 2017 government report found that for a sustained sealift campaign the United States faces a deficit of approximately 1,800 mariners for those needed to crew the RRF and maintain commercial fleet operations—and that’s in a best-case scenario. The obvious remedy according to Buzby: increase the number of U.S.-flag ships to provide more employment opportunities.

“We believe we’re around 1,800 mariners short. So how do you make that up? That’s the question I get asked every single time. We need more places for people to work in peacetime. We need more…we need a larger U.S.-flag fleet by probably about 45 ships.”

Notably, Buzby is an ardent supporter of the Jones Act, the 1920 law which restricts the domestic waterborne transport of goods to vessels that are U.S.-built, U.S.-flagged, at least 75 percent U.S.-crewed, and at least 75 percent U.S.-owned. Indeed, at the same event he listed defending the law remains as among his top priorities. Yet the Jones Act’s U.S.-build requirement is a direct impediment to realizing the goal of more U.S.-flag ships.

That’s because commercial ships built in U.S. shipyards are expensive—frightfully so. A May 2019 Congressional Research Service report found that a U.S.-built tanker is roughly quadruple the price of a foreign-built vessel, while a U.S.-built container ship may be quintuple the price of one constructed abroad. For perspective, the same report said that the cost premium attached to U.S.-built ships shortly after the Jones Act’s passage was 20 percent.

This rise in price has correlated with a pronounced decline in the number of Jones Act-compliant ships. Fewer ships means fewer mariners to crew the RRF fleet.

ships

It stands to reason that if Americans had access to cheaper ships that there would be more of them. But don’t take my word for it—U.S. shipyards themselves admit that high prices are a deterrent to the use of the ships they build.

In 2007 the Metal Trades Department of the AFL-CIO filed suit against the U.S. Coast Guard over its ruling allowing the use of foreign-built equipment modules in the construction of ships deemed to be U.S.-built. Unsurprisingly, U.S. shipyards sided with the Coast Guard. Preventing the use of foreign-built components, Aker Philadelphia Shipyard and General Dynamics-NASSCO argued, would make U.S.-built ships more costly and less attractive to purchase. That would mean both less shipbuilding and fewer vessels in the Jones Act fleet.

As Aker (now known as the Philly Shipyard) stated:

[p]reventing shipbuilders from using more efficient methods in constructing vessels will increase the vessel owners’ capital cost. This in turn will increase the rates that the vessel owners must charge, decreasing their competitiveness and further reducing their share of the domestic transportation market. The lower market share will lead to a reduction in the size and number of vessels needed to fulfill the demand for domestic shipping.

If more expensive ships means fewer ships, the reverse logically holds true—cheaper ships means more of them. And the cheapest solution of all would be to allow Americans to transport goods using ships built in other countries, just as they can for all other forms of transportation. That’s not just a good way to expand the U.S.-flag fleet, it’s what free people should be allowed to do.

August 22, 2019 11:05AM

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.