Foreign Policy

China's Economy Is Feeling Trump's Tariffs

Its growth is at a three-decade low as Beijing is under increasing pressure by the U.S.

Lewis Morris · Jul. 23, 2019

The trade war between the U.S. and China is taking such a serious toll on the communist nation that even its state-run media can no longer hide. China’s economy is growing at its slowest rate in 27 years. The Chinese, their apologists in the Leftmedia, and some economists have pointed out that the slowdown was not unexpected and that the Chinese economy is still chugging along at 6.2% growth. But that doesn’t quite hide the pain.

Any free-thinking person with a sense of history must assume categorically that China’s economic numbers are as cooked as its currency, but there is one recent development that can’t be explained away by sharp pencils and doublespeak — the recent flight of several foreign companies from China.

American and Japanese companies are taking steps to reduce manufacturing footprints in China due to rising costs brought on by American tariffs. More than 50 multinationals, including tech heavy hitters Apple, HP, and Dell and gaming giant Nintendo have all either shifted or are considering shifting significant percentages of production to other countries in Asia. This is a direct result of the Trump tariffs. And it couldn’t have come at a worse time for the Red Chinese.

China’s state-run economic model is starting to show signs of strain. It may have been doing so for some time already and just remained well hidden, but there are factors that are now undeniably evident. The working-age population has stopped growing, and Chinese goods have saturated foreign markets to the point that it can no longer expand exports like its Asian neighbors, all of which are enjoying more sustainable economic growth rates than China.

There is an even more fundamental problem. China is finding it difficult to run a modern internationally competitive economy in a communist state. Top leaders believe strong state involvement in the economy is exactly what will make China globally important. Private Chinese companies, a handful of which are leaving the country to avoid the Trump tariffs, are having a tough time competing with state-run enterprises because the state companies receive favorable treatment in the form of loans and infrastructure support.

This is all good news for America, and it’s good news for President Donald Trump. He has been much maligned for taking on China, but it is the right thing to do. For decades, China manipulated its currency, undercut America on trade with a variety of questionable or outright illegal trade practices, and created a falsified view of its true economic picture. It consistently faces accusations of improper activity by other members of the WTO. (The United States backed China’s membership into the world trade governing body, by the way.)

Indeed, it was China that started the trade war.

Trump is the only president in the modern era who has openly challenged Chinese leaders and taken them to task. They likely figured Trump to be like many of his predecessors — say a few harsh words on the campaign trail and then do nothing. Well, they figured wrong. As a bonus, American leftists were hoping the tariffs would cause enough harm to the U.S. economy to foil Trump’s reelection. And they were wrong, too.

Trump should press the advantage by making a strong global case against China, reminding other nations that Beijing has not been playing it straight with any of them. Who knows? He just might bring the results the world needs.

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