Donnie Trump ‘Em’s Trade War

The U.S. International Trade Commission recently issued a notice that China's passenger car tire imports did not constitute any substantial damage or threat to the U.S. automotive industry, and that U.S. Customs would not impose any anti-dumping or anti-subsidy tariffs on China's passenger car tire imports. The Trade Investigation Bureau of the Chinese Ministry of Commerce (MOFCOM) responded that the U.S. International Trade Commission's ruling was objective and in line with the facts, and the Chinese expressed appreciation for the fairness of the ruling.

This author strongly believes that China is highly reluctant to openly assert that, if the United States imposed punitive tariffs on Chinese tires, U.S. car buyers would have serious trouble getting their hands on low-cost, high-quality alternatives, thus putting unnecessary burdens on the consumer. There has been a laundry list of attacks on China by rookie president Donald J. Trump; from day one he began attacking Sino-U.S. trade as unfair, on the grounds that China has obtained a great trade surplus through manipulation of the exchange rate, and he intends to declare China a currency manipulator, allowing him to impose punitive tariffs on Chinese products. Many analysts believe that the imposition of anti-dumping and anti-subsidy tariffs by the U.S. is no small wonder, but the fact that so far there have been no tariffs could knock down many an analyst with a feather. When the Trump administration finally does come to its senses and begins weighing the pros and cons, it will find that launching a trade war with China would be a losing proposition.

If past commanders-in-chief have been political presidents, then Trump — an economic president — has to be the economic yin to their political yang, not only because he comes from the business world, but also because he has seen the terrible ramifications that stemmed from the United States indulging too liberally in the speculative financial bubbles of the fictitious economy, while turning a blind eye to its goods and services economic base that resulted in a hollowing out of America’s real economy. And so our intrepid hero “The Donald” is bound and determined to wrest the manufacturing industry back from the hands of the Chinese, who pulled off the “greatest theft in history.” Trump has been in office for more than a month now, and has spent the majority of that time bogged down in international issues with no settlement or forward motion in sight, yet he still enjoys a great deal of support.

However, Mr. Trump must realize that returning the manufacturing industry to the United States is a hefty proposition, and going so far as to threaten and intimidate others with an even bigger bat will prove fruitless because his actions and policies inherently go against the current tide of globalization.

Trump has pressured Apple CEO Tim Cook to bring Apple's smartphone production lines back home from China. The iPhone has always been designed in California, though the parts come from more than 700 suppliers around the world. Apparently, Mr. Trump feels that there is no point in mentioning the fact that the cost of assembling an iPhone in China is less than $10, and if that same phone were assembled in the United States, U.S. consumers would have to pay $30 or $40 more; if those same parts were manufactured in the United States, then the iPhone would cost hundreds of dollars more. In an economically globalized world, products manufactured entirely in one country, especially high-tech products, are getting rarer as days go by.

For Mr. Trump, the subject of trade imbalances is an even more convoluted question. Before Japanese Prime Minister Shinzo Abe’s two meetings with Mr. Trump in early February, the U.S. Department of Commerce had already announced that, of last year's U.S. trade deficit, Japan accounted for 9.4 percent of the total, up 0.2 percentage points over the previous year. It also bears mentioning that in the auto industry Trump has so vehemently accused of unfair trade practices so often, there was a huge growth in last year's trade deficit of $52.6 billion, which increased by $48.9 billion over the previous year, accounting for 80 percent of the total deficit. Although the Japanese auto industry has taken great pains to expand production in the United States, the vehicles Japan sold to the United States are high quality and the average unit price has risen, resulting in further expansion of the deficit.

With a total of $297 billion, which blew China’s $245 billion out of the water, the title for trade surpluses in 2016 has to go to Germany. Some analysts claim that Germany has replaced China as “the one with its head on Trump’s chopping block,” because after all, he who sticks his neck out is liable to get it cut off. Trump is absolutely fuming and now has Germany right in his sights, accusing the country of manipulating the euro’s exchange rate so that it profits off trade at the expense of the U.S. Seeing as there has been little change to the average German worker’s wages over the past 14 years, American economists have thus accused the German government of intentionally suppressing wages, thereby reducing German manufacturing costs and boosting the country’s competitiveness on the world market.

The stiff competition that high-quality automobiles and other consumer products from Japan and Germany present to the United States are what is giving it fits, not trade agreements with the Middle Kingdom, which are highly complementary. The Trump administration should sit down calmly and assess the situation, then look in the mirror and seriously contemplate whether it actually wants to fight a trade war with China or to maintain cooperation, mutual benefit and common development.