Trump is right on China but wrong on tariffs

The US and China continue to head toward a possible trade war, as negotiations to bridge the gap between the two countries last week ended inconclusively. Donald Trump’s administration has demanded far-reaching Chinese concessions to reduce the bilateral trade deficit, address Beijing’s mercantilist trade practices, and open up key sectors of the Chinese economy to greater foreign competition.
The White House has underscored its demands by applying sanctions on steel, aluminum and a host of other imports and restrictions on Chinese investment. Beijing has responded in kind, imposing tariffs on an array of American goods and offering only minimal concessions.
The consequences of a full-on confrontation between the world’s two largest national economies would be quite serious across the globe. But the Trump administration is not entirely wrong to be disrupting the US-China trade relationship.
The basic insight is Trump’s argument that unfettered economic integration with China isn’t necessarily a good thing. Since the end of the Cold War, US officials have worked assiduously to deepen the economic ties between China, the US and the broader world, on the theory that a richer China would eventually become a more democratic and peaceful China. “Trade freely with China,” George W. Bush once said, “and time is on our side.” Unfortunately, things haven’t quite worked out that way. China’s authoritarian rulers have used growing prosperity to buy off a growing middle class and avoid any meaningful political opening. And rather than becoming a satisfied member of the US-led international system, Beijing has used its wealth to pay for a vast military buildup and a wide-ranging geopolitical offensive that is testing that order more and more strenuously. Admittedly, China might well be a more disruptive actor were it not so involved in international economy, but loftier ambitions that accompanied its insertion into global commerce have not yet been realized.
Meanwhile, economic integration with China has had other problematic consequences. Beijing has aggressively targeted the US manufacturing base as part of an effort to build its own domestic enterprises and establish a dominant position in a range of important industries, from steel to semiconductors and beyond.
It has used subsidies, tariffs, forced technology transfer and other protectionist approaches to reach for supremacy in high-technology sectors, including many with important national security and defense implications.
Likewise, China is expanding its control of critical infrastructure around the world, as a way of strengthening both its geo-economic and its geopolitical position.
Not least, China has used the economic leverage provided by its wealth for political ends. Beijing has relied on the allure of Chinese commerce and capital to silence criticism of its human rights abuses in Europe and elsewhere.
China, in other words, is playing for keeps. It is using the fruits of economic integration with the US and the broader world as a way of strengthening its ability to compete against America and its allies.
If the US is going to hold its own against the Chinese challenge, it will have to take a harder-edged geo-economic approach.
The US government, in cooperation with American industry, will have to figure out how to shield particularly critical pieces of what has been called the “National Security Innovation Base” from predatory Chinese practices. Universities and think-tanks will have to think hard about how reliant their business model should be on students and money from China. The US and its allies will need to devise better procedures for protecting infrastructure that China may seek to control for geopolitical ends.
America doesn’t need to make a clean economic break with China, but it certainly does need a more selective approach to openness.
Here is where Trump’s approach contains some value. Limiting US economic integration with China will inevitably involve some near- and medium-term pain for the enterprises and consumers affected. Convincing voters to tolerate that pain will require initiating a serious public conservation about the more problematic aspects of the US-China economic relationship.
Any program to manage interdependence with China will be effective only if Washington can gain the cooperation of its allies and partners in Europe as well as the Asia-Pacific.
In part, this is because China is adept at picking off stragglers through targeted trade and investment deals. Also in part, it is because collective action dilemmas of managing interdependence with China become easier to manage if the US can act in concert with its friends, and because the economic pain of doing so is lessened if collectively they can simultaneously deepen their economic integration with one another.
Trump, unfortunately, seems set on fracturing the US-led coalition. He has done so rhetorically from the outset, by voicing skepticism if not outright hostility toward many US alliances and allies. He has also done it more concretely, by withdrawing from the Trans-Pacific Partnership, an initiative designed precisely to consolidate a US-led economic community in the face of China’s rise, and by implementing trade sanctions on steel and aluminum in ways that seem likely to hurt Europe and Japan as much as they injure China.
The Trump administration deserves some credit for talking about the threat that China poses more honestly and openly than any administration in decades. The president himself is not wrong to force a discussion about how to manage interdependence with a country that is more rival than partner. But foreign policy is ultimately about execution, and as in so many cases, Trump’s policies seem likely to isolate America on a matter where unity and concerted action are essential.
—Bloomberg

Hal Brands is the Henry A. Kissinger Distinguished Professor at the Henry A. Kissinger Center for Global Affairs at Johns Hopkins University’s School of Advanced International Studies and a senior fellow at the Center for Strategic and Budgetary Assessments

. His latest book is “American Grand Strategy in the Age of Trump