On Monday, the White House issued a joint statement with China on trade in which the countries agreed to “pause” the trade war for 90 days.  

In summary: the United States slashed tariffs from 145 percent to an effective rate of 30 percent, while China likewise slashed tariffs from 125 percent to an effective rate of 10 percent. Higher tariffs remain on certain goods including steel, aluminum, and automobile parts.

China also agreed to suspend non-tariff escalations which were imposed after April 2. China will suspend export controls on rare earth minerals, remove certain American companies from their “blacklist” that limits their Chinese operations, and end the anti-dumping probe into DuPont.

The Trump administration has billed this as a big win. China also claims victory.

Unfortunately, the reality is that China got the upper hand. Why?

Pausing the tariffs helps China and hurts America. On top of that, the deal does not touch on core nonmonetary issues such as China’s intellectual property theft—issues which are impossible to solve through negotiations in any event. This deal simply delays America’s reindustrialization and gives China more time to loot our coffers.

Tariffs have two primary purposes. First, tariffs are a tax that generates revenue. They can be very lucrative when it is cheaper to manufacture abroad even after paying the tariff to bring the goods into America.

Second, tariffs can reshore and protect domestic production. That is, if the tariffs make it too expensive to manufacture abroad, then industry will manufacture in America to avoid the tariffs.

In my view, the real point of tariffs is to reshore American industry. In order for tariffs to work this way, however, the tariffs must be high and stable.

How high? The cost of manufacturing is in China is between 40 and 60 percent lower than in America, depending on the industry. Unless tariffs are higher than this, it remains economical to manufacture in China and simply pay the tariff. Accordingly, the tariffs need to be at least 60 percent to make meaningful headway in reshoring factories.

This is no longer the case. As such, the tariffs are currently just another tax scam.

Also, it is important to remember that the tariffs must be high enough across the board so that they do not simply result in factories moving from China to India or Vietnam—as happened last week, when Apple announced it would move production from China to India. The only way that tariffs will reshore factories is if they equalize market asymmetries between America and everywhere else.

Although this rate sounds high, we need to remember that America’s tariff rate throughout the 19^th century was more than 30 percent—and this was before forklifts and container ships. It would need to be higher now to achieve the same result. More recently, South Korea industrialized with average protective tariffs of roughly 40 percent—and they also had the advantages of a weak currency and cheap labor.

But America also needs stable tariffs. A local manufacturer like Delany Flush Valves cannot risk spending millions to restart their foundry in Charlottesville, Virginia, if the tariff rate flip-flops every week. Nor will a company like Apple invest billions in new factories in Arizona. Instead, companies like Apple will try to ride out the storm—probably with the help of foreign governments who are keen to maintain their toeholds in America’s market.

President Trump needs to pick a flat tariff rate and stick to it. Alternatively, he could announce gradually increasing tariff rates four years into the future, to give manufacturers time to reshore their production to America. Either way, businesses need stability.

President Trump would be wise to remember the words of Marcus Tullius Cicero: “More is lost by indecision than wrong decisions.” President Trump needs to commit to high and stable tariffs. This is the key to reshoring America’s factories and reviving the American Dream—as I demonstrate in my book Reshore.

Tariffs are just one piece of the puzzle. The grim reality is that China’s entire legal system and business culture systematically protects Chinese producers from American competition.

For example, when an American company wants to build a factory in China, they are legally obligated to “partner” with a Chinese company. This Chinese partner operates the day-to-day management of the factory. As a part of this deal, the Americans share their propriety technology with the Chinese company and train the Chinese workers.

American businesses are happy to trade technology for short-term profits. Of course, this comes back to bite them. Once the Chinese have acquired the technology and knowhow, they often make copycat products and begin competing with their former employer.

A good example of this is the Pearl River Piano Group. They were contracted to build Steinway’s Essex line of lower-end pianos. After acquiring the technology, industrial capital, and experience in manufacturing pianos, Pearl River rolled out its own copycat lines: Pearl River and Ritmüller. In trying to cut costs by outsourcing to China, Steinway created its own competitor.

This is a major vector for intellectual property theft, which costs America up to $600 billion every year. Unfortunately, this issue has not even been mentioned in the joint release.

In any case, these negotiations are unlikely to go anywhere. The fact is that China agreed to play by the rules when they joined the World Trade Organization in 2001. China then spent the next two decades violating their own agreements at every twist and turn. We should have little confidence that China will enforce any nonmonetary agreements in the future.

If President Trump is serious about reindustrializing America, he needs to commit to high and stable tariffs. If not, he will poison the public against tariffs for another generation, and “Liberation Day” will go down in history as just another tax increase.