In an early morning tweet on March 2, President Donald Trump avowed that “trade wars are good, and easy to win.” We’re about to find out if he’s right. Trump may have just started one with China.
Trump’s recently announced tariffs on steel and aluminum look trivial by comparison—especially if, as expected, he ends up granting exemptions to U.S. allies. Using an arcane statute of the Trade Act of 1974, the office of the U.S. Trade Representative (USTR) has concluded an investigation of China’s unfair practices against U.S. firms, including forced technology transfers, joint venture requirements with Chinese partners, and outright cyber espionage.
Well aware of these problems, the U.S. government has struggled over the years to find a response that doesn’t shoot America in the foot by driving up consumer prices and damaging a trade relationship that is now worth more than $600 billion in goods and services annually. For the most part, U.S. executives have been complicit, happy to meet quarterly earnings even if it means getting squeezed out of China’s market in the long run.
Now the Trump administration is saying the jig is up. They’re sick of China’s empty promises and fruitless dialogues. They don’t think the World Trade Organization can rein China in. And they’re worried that another decade of Beijing’s abusive policies will destroy what’s left of America’s manufacturing base, as well as result in Chinese dominance in future technologies like artificial intelligence and robotics.