China has been slowly sucking America dry through unfair trade. Trump is right to demand that it treat us fairly and I think he’ll win this trade war.
When I graduated from high school, a family friend, recently widowed, sold me her deceased husband’s eight-year-old car for a price I could afford with the money I’d saved over the years from babysitting and summer jobs. I drove that car for the next eight years, during which time I commuted one to two hours a day to college and work, and then, after graduating, drove it halfway across the country and used it while I attended law school in Texas (and worked then too).
The car was an amazing lemon. I got stranded in all sorts of places, from storm ridden freeways to scary neighborhoods to high mountain passes. During my last year in Texas, the heater broke and was stuck permanently in “on” position . . . in Texas . . . during the summer.
When I got my first real job as a lawyer, with a lovely (and completely undeserved, considering my abilities) paycheck, my very first purchase was a new car. I got the very first Acura Integra that rolled off the assembly line. It didn’t have a radio or air conditioning, but neither did my old car. What it did have was splendid reliability. That car lasted me for years and I got rid of it only when I had my first child and traded it in for the ubiquitous mom minivan.
But back to that old car. The problem for me was that, whenever it broke down, I had just enough money to pay for fixing it. But because I kept paying to fix it, I was never able to stockpile enough money to buy a new car that wouldn’t break down. Over the eight years I owned that car, little bit by little bit, I paid my mechanics substantially more than I ultimately paid for my brand new Acura. To put it more graphically, when it came to that darn car, I was chronically hemorrhaging and was only able to blot up the latest blood flow without ever being able to end the bleeding altogether.
My relationship with my old car is a metaphor for America’s trade relationship with China for the past four decades. China has been bleeding us here and bleeding us there. Thus, over the decades, he’s been stealing our intellectual property, cheating on trade deals, using government subsidies to undercut our industries and (much worse) using slave labor to undercut our workers.
In addition, China is still benefiting from statutes that gave her super low shipping rates back in the day when she was a struggling third world country. It can now be cheaper to have something shipped to your house (via Amazon) from China than to get a comparable product shipped to you from Ohio. By the way, that’s not China’s fault. That’s Congress’s fault.
As I see it, China’s been our bad car, causing us endless money loss but always, just barely, sort of, being worth it. Over the decades, we stuck with her because consumers got cheap products (cheap in cost, cheap in quality), politicians got bought, and free trade advocates said “no tariff war! no tariff war!”
Before I go on with my extended metaphor, let me talk about those free trade advocates. I like free trade if for no other reason than the fact that it limits corruption. As Milton Friedman noted, the English government was notoriously corrupt during the 18th century in large part because there was always profit to be had for government agents (from governors through to the lowest petty clerk) through tariffs and other trade interference. Indeed, it was British interference with free trade that sparked the American Revolution. When Britain abandoned its tariff policies, it suddenly had one of the most honest civil services in the world.
Pure free trade is a problem because it’s never really fair trade, at least not in today’s world. As noted above, what we’ve had going with China has been exceptionally unfair, and therefore not-free, trade. American workers can’t compete with prison labor or intellectual property theft.
In the same way, it’s great to get cheap goods from India, but American workers also can’t compete with child labor that gets paid $1 a day. I’m pleased that our money helps raise the standard of living in India, one child worker at a time, but the downside is that if India manages to replace our own industries, we plunge fellow Americans into the economic abyss. Sure, “it’ll all even out in the end,” as the free traders say, but I have to ask “At what cost?”
Moreover, some of the most successful Republican presidents have supported tariffs that protect American workers. As my friend Don Surber wrote in the context of Trump’s battle with the Chamber of Commerce’s perpetual fight to keep cheap, illegal labor pouring into the country:
Let me make this clear: Republicans support protective tariffs. Always have, going back to Lincoln.
And Lincoln also opposed “a useful labor supply” called slavery. While the importation of illegal aliens is a far cry from slavery, nevertheless no true American should support the exploitation of people smuggled into the country to operate in an underground economy.
Don explained this more fully in another post:
Every Republican president from Lincoln through Reagan supported protective tariffs. Indeed, it was the 12th of the 17 planks in the original Republican platforms that elected Lincoln president.
Lincoln was a strong supporter of protective tariffs.
Two days before Lincoln’s inauguration, Democrat President Buchanan gifted him by signing the Morrill Tariff, which passed through Congress as Southern states withdrew their congressmen and senators at the outset of secession, which was the Pussyhat Resistance of the day. Southerners opposed tariffs.
Republican Congressman Justin Smith Morrill wrote it but he is best known for his land-grant colleges which set up universities across the land including West Virginia University. He is a reminder that we used to send people to Washington who were not knotheads.
Lincoln signed the land-grants bill into law in 1862. Lincoln also set up construction of the first transcontinental railroad. The Civil War ended slavery, and tariffs and railroads built the post-war economy.
The Neocons cried “free market” to tear down the walls of tariffs that protected our economy.
But the market is not free. Other countries subsidize their industries. We tax ours.
President Trump went back to the roots of the party.
So, while I like free trade, I am deeply, rigidly opposed to unfair trade. If it takes a trade war to get to the former and ditch the latter, count me in.
But back to my car analogy. Having Trump in the White House — someone who’s made a career out of negotiations, someone who understands how business (both domestic and international) works, and someone who has guided us back to a strong economy — is the equivalent of my finally getting my first real job so that I could ditch the car that was killing me by inches. At some point, you have to get rid of the ride that’s slowly killing you or you will surely find yourself dead. Trump, by taking China on, is doing just that.
As for who I think will win this trade war, I have to say that James Mullin’s trade war math makes sense to me:
As a scientist, I feel it useful to occasionally engage in facts, and for me, the simpler, the better. So try this scenario: if Country A exports 20X more to Country B than Country B does to Country A, which side do you think has more to lose in a protective tariff war? Could it be the country that exports substantially more? Hmm.
Country A in this little exercise is China. Its exports to the U.S. (Country B) dwarf U.S. exports in return. After all, over 40 years, the Chinese swallowed a big gulp of our domestic manufacturing, and it’s been hard at work stealing our technology and intellectual property. If China and the U.S. now install similar tariffs, it is not quantum physics to see that a tariff war will hurt China far more than the U.S., as the cost of Chinese exports (the major factor in the equation) mushrooms. After all, the three major trading partners and markets of the U.S. are Canada, Mexico, and Europe — not China. Want to bet that the reverse is not true?
Oh, by the way — the major American export to China is…? Answer: food. Try making that substantially more expensive in the world’s most populous country!
One more thing that sounds good to me: When Trump talks about China, he disparages its trade policies, but he never disparages Xi, his opposite number in China. Xi is his friend; Xi is someone with whom he has a great relationship; Xi is a smart guy.
Speaking of smart guys, Trump’s is a very smart tactic. Unless you’re a sadist and a bully, you always do better if you follow the Dale Carnegie How To Win Friends and Influence People approach, which is to make people feel good about themselves by working with you.
If the chattering class allows Trump to stay the course, I think he can win the trade way. In this case, winning means getting America into a functional new trade relationship with China, rather than seeing it slowly dying on the trade route between here and Asia.