Trade War
President Trump is waging war, a trade war against the second largest economy in the world, China. It’s an “old fashioned” tariff war, just like the 19thCentury battles over sugar and coal. We are raising taxes on their goods, and they are raising taxes on our goods. Everyone pays more, and everyone loses.
China isn’t blameless. They stole US technology, violated US patents and copyrights, and shamelessly profited from the thefts. They are building a world-class economy, based on state-sponsored industry, low waged workers and purloined processes.
US Companies Profit
But the US isn’t blameless either. US companies have moved to China to take advantage of the cheap labor and sales in the fourth largest consumer market in the world. And it’s not just making computer chips. Here’s the top-ten American corporations in China:
| Corporation | China Market Share | Product(s) |
| Kentucky Fried Chicken | 40% Share | fast food |
| General Motors | 12.7% Share | cars |
| Microsoft | 99.3% Share | Computer Operating Systems |
| Boeing | 52% Share | Commercial Aircraft |
| Nike | unknown – $2 Billion Profit | sportswear |
| Coca Cola | 26.9% Share | Soda |
| Proctor & Gamble | 55% Share | Hair care products |
| Intel | 14.9% Share | Semi-conductors |
| Starbucks | 70% Share | Retail Coffee |
| Apple | 51% Share | tablets |
Emergency Powers
China has a lot to lose in a trade war with the United States. Today, President Trump “tweeted” that he could invoke the powers of the “Emergency Economic Powers Act of 1977” to force US companies out of China. While the 1977 law was written to replace the “Trading with the Enemy Act,” a wartime provision, the language of the law allows a President to determine the “emergency” and enact the powers. That’s true, even if the President himself is the one who created the crisis.
And while Congress has the ultimate authority to control the President’s use of that emergency power, we’ve seen how well that worked when Mr. Trump declared an “emergency” on the Southern Border. As long as Leader McConnell stops the Senate from action and allows the President to continue, Congress is impotent.
But when you look at those companies operating in China (and that’s only the top ten) and consider the losses those companies would take if forced to leave, the US has a lot to lose in the trade war too. If the President is concerned about China, he also should be concerned about America’s future economy. With warning signs of impending recession already visible, and the negative impact of trade warfare hitting farmers, the auto industry, high tech products and others; Trump seems to be trading his “war” for the US economic future.
Allies Help
There needs to be a US adjustment with China, no doubt. In the past this kind of trade move would have included many of the United State’s allies, and would have had a greater impact on the Chinese economy. A quick example: the Chinese raised tariffs on US soybeans, cutting the amount sold to China, the world’s largest soybean consumer. The Chinese then moved to Brazil to maintain their soybean supply. In the past, the US would have allied with Brazil first, to keep pressure on the Chinese market.
President Obama negotiated the Trans-Pacific Partnership, or TPP, for the purpose of arraying the economic powers of the Pacific against China. Japan, Mexico, Canada and others were members. Their coordinated actions to control trade with China would have had a greater impact than any one of those nations, including the United States, acting alone. But President Trump withdrew the US from the TPP.
In addition, Mr. Trump has engaged in tariffs “tiffs” with many of those TPP members, including Canada and Japan. That reduces the likelihood of their cooperation in any US trade battles.
All Alone
So here we are, the United States, without friends. Like any war, economic or military, it’s good to have allies to share the burdens and sacrifices. But the current administration has intentionally placed us in an isolated position: America First has come to mean America Alone.
While we are still the biggest economic power in the world, in our trade war with China we will be forced to make all of the sacrifices. Other nations, already “put-off’ by Mr. Trump, will do what’s in their own best interest, and sell China the products we don’t. They’ll make their money, China will suffer less, and the US will struggle more.
We’re the “Lone Ranger” – and, “Ke-Mo-Sabe,” we could use some help. It’s too bad we won’t get any.
