Darley Shen / REUTERS Workers at a Foxconn factory in Wuhan, Hubei province, China, August 2012.

Protecting America's Technology Industry From China

Tariffs Aren't the Answer

A month into U.S. President Donald Trump’s trade war with China, the conflict has generated only a flurry of rhetoric and threats, but further escalation looms. Both sides are close to implementing tariffs on another $16 billion worth of goods, and the United States looks prepared to impose tariffs on a further $200 billion worth as early as the end of August. So far, investors seem to see these tensions as temporary and believe that they won’t damage the overall U.S. economy. The stock market has barely budged, and futures prices for steel and agricultural goods caught up in the conflict show that traders expect prices to return to more normal levels within the next six to nine months.

Yet the most important question is not how long the trade war will last but whether the U.S. frustrations that sparked it in the first place will be addressed. Unfortunately, the Trump administration is only partially focused on the right issues, and so it has reached for the wrong weapons. The heart of the commercial conflict between China and the United States is not metals and beans or trade balances but the commanding heights of any economy: high technology industries. The dangers to U.S. high-tech prowess are only loosely connected to trade. That’s why tariffs should not be playing the starring role for which they have been cast.

DIFFERENTIAL DIAGNOSIS

One often hears that when it comes to the U.S.-Chinese commercial relationship, the Trump administration has the diagnosis right but the prescription wrong. That is largely true. The administration certainly deserves credit for raising the urgency of unfair Chinese practices. White House economic adviser Peter Navarro’s June report, “How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World,” is hyperbolic in much of its language, but it rightly identifies various Chinese actions that create an uneven playing field. Similarly, the Office of the U.S. Trade Representative’s

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