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Beyond the Trade War

A Competitive Approach to Countering China

U.S. and Chinese trade delegates pose for a photo in Shanghai, July 2019  Ng Han Guan / Pool / Reuters

The verdict is in on U.S. President Donald Trump’s trade war with China. Regardless of whether U.S. negotiators soon reach a deal with Beijing, the administration’s initial gambit has run aground. After wreaking havoc on portions of the U.S. economy with his trade policies, the president is now angling to freeze or roll back tariffs on Chinese products in exchange for almost nothing. Deal or no deal in the coming days, it is clear that the United States needs a fundamentally different approach to economic competition with China—one that bolsters U.S. technological and financial power while countering Beijing’s malign activities directly.

Tariff hikes haven’t forced Beijing to capitulate. Chinese negotiators are reportedly making only vague commitments to assuage U.S. concerns about currency manipulation and intellectual property theft. They have refused outright to accept a much-needed enforcement mechanism on international trade practices or to make structural reforms to promote economic competition at home and abroad. At best, Beijing will restore agricultural purchases to pre–trade war levels, offering as its biggest concession something it wants to do anyway: let in more U.S. capital to balance China’s checkbook and reenergize sluggish growth.  

Part of the Trump administration’s problem is that it is divided over what exactly it is trying to achieve with the trade war. One camp sees higher tariffs as leverage to compel Beijing to abandon industrial policies that harm the United States. Such an approach might have worked better if the tariffs had been implemented by allies as well as the United States. But leaders in Beijing haven’t budged on unwinding their state-led economic model. To the contrary, the country’s chief negotiator, Vice Premier Liu He, announced recently that China aims to make its public sector “stronger, better and bigger.”

Another camp within the Trump administration champions tariffs as part of a comprehensive “decoupling” of the world’s two largest economies. Yet while the United States

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