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Thomas Gallatin / September 19, 2018

Behind Trump’s China Tariffs

Ending the North Korean nuclear threat and establishing fair trade are Trump’s goals.

With President Donald Trump’s announcement Monday of an additional $200 billion in tariffs on Chinese goods, the specter of an all-out trade war increasingly looms. China was quick to vow $60 billion in retaliatory tariffs. But Trump only doubled down, declaring on Tuesday, “China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me. There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted.” (We’ve previously warned of exactly this kind of electoral manipulation by China.) He then threatened to add another $267 billion in tariffs, raising the total to $517 billion — which essentially covers all of China’s U.S. exports — should Beijing follow through with its own retaliatory tariffs.

There is no question Trump’s tariffs will do further damage to an already hurting Chinese economy, but U.S. business will also increasingly feel the hit. Such is the harmful nature of tariffs and why free trade is preferable for sustaining business growth and a healthy economy. However, Trump has several important issues in view here beyond the immediate concern for the nation’s current economic welfare.

Almost like clock-work, every time Trump presses China, he gets results with Beijing’s nuclear puppet, North Korea. On Tuesday, it was reported that Kim Jong-un has agreed to allow outside inspectors to visit the country’s missile-test sites and that he is open to decommissioning its nuclear enrichment facility at Yongbyon. After meeting with South Korean President Moon Jae-in, Kim reiterated his desire to work “toward a peaceful peninsula without nuclear weapons or nuclear threat.” This is welcome news, though we note it with a healthy dose of skepticism. There is clearly still a long way to go, but few can reasonably argue that this is going in the wrong direction. This concession by Kim has Beijing written all over it.

But ending the North Korean threat is not Trump’s only aim. He is countering China’s active attempts to gain the upper hand in global economics. Investor’s Business Daily reports, “As part of its 10-year Made In China 2025 initiative, also known as CM2025, China hopes to gain global technological and market dominance in 11 key technologies.” Beijing’s goal is especially problematic because China has consistently and persistently violated international trade rules. In other words, the Chinese are not and never have been interested in fair play or truly free trade.

Trump’s ultimate aim is to force China into forgoing its efforts to control world markets. As IBD notes, “Nothing short of China abandoning its export-driven model for extending its economic domination of Asia and its CM2025 plan to dominate world markets — at the expense of the U.S. — will satisfy Trump. For free trade to work, it requires both parties to play by the rules. So far, China has failed to do so.”

So now it’s become a high-stakes game of chicken. Will China’s economic downturn push Beijing to blink first? Or will Trump’s play backfire on his booming economy?

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