Will China Trump Trump?

Antagonizing Beijing for Short-Term Gains

An employee works at a Chinese automobile factory in Hefei, Anhui province, March 15, 2014. Reuters

Mercantilism has destabilized the world for centuries. Before the Industrial Revolution, rulers stifled imports through tariffs and quotas to boost domestic production, weaken rival powers, and increase global influence. Inevitably, these moves led to short-term gains but also to political tension, territorial expansion, and fatiguing wars. The consequences of President-elect Donald Trump’s neo-mercantilist attitudes, particularly toward China, are unlikely to be as catastrophic, but they are still concerning. They will bring little employment relief to the American working class while irreparably damaging the world economy.

Trump repeatedly railed against Beijing during his campaign. “China’s entrance into the World Trade Organization,” he bluntly argued during a speech in Pennsylvania, “has enabled the greatest jobs theft in history.” In his view, the $365 billion trade deficit with China is simply the result of unfair business practices that force U.S. manufacturers out of the market. This superficial analysis ignores that trade deficits also stem from a lack of thriftiness among Americans and implies that dollars would flow back home in the form of foreign investment. Trump is very clear on the issue: “We already have a trade war and we’re losing, badly.”

Declaring China a currency manipulator, bringing trade cases against Beijing at the WTO, and imposing new tariffs on Chinese goods top his electoral program. Peter Navarro, Trump’s economic adviser, believes that a 45 percent tariff on Chinese imports would compensate Americans for Beijing’s wrongdoings, from illegal export subsidies and currency manipulation to intellectual property theft and environmental wreckage. Like an old-fashioned mercantilist, Trump argues that curbing Chinese imports would reestablish fair competition, leading, in turn, to the resurgence of manufacturing in the United States. 

But that line of thinking is delusional. Overall industrial output in the United States is at a historical high, while manufacturing employment is at a historical low. As it happened with agriculture more than a century ago, technological progress, which leads to productivity gains, is to be blamed for the dearth of blue-collar jobs

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