Last Thursday President Donald Trump announced that his administration would impose a 10 percent tariff on $300 billion of Chinese imports starting September 1, in addition to the existing 25 percent tariff on $250 billion in goods introduced last spring. Virtually everything the Chinese export to America may soon be subject to some level of import tax. The decision has prompted two broad types of criticism: one viscerally Trumpophobic, the other pro-“free trade” globalist.


The first category, as exemplified by several Democratic presidential hopefuls, is unworthy of analysis. Pete Buttigieg argued that China’s “fundamental economic model isn’t going to change because of some tariffs,” as if imposing a new “fundamental model” had been Trump’s objective. Sen. Michael Bennet said that Trump has been pushing back on China “in completely the wrong way,” without elaborating on “the right way” he’d support. Andrew Yang complained that “tariffs and the trade war are just punishing businesses and producers and workers on both sides” [emphasis added], thus implying that POTUS should worry about the interests of Chinese workers and producers when making decisions about America’s trade strategy.


The second type of objection was summed up in a CNN Business commentary on August 3 (“Trump is playing a dangerous game with America’s economy”): the new tariff will only add to the global downturn in manufacturing, it will further undermine business confidence, may adversely impact consumer spending, and prompt retaliation from Beijing is certain to follow.


The decision “will only inflict greater pain on American businesses, farmers, workers and consumers, and undermine an otherwise strong U.S. economy,” Myron Brilliant of the U.S. Chamber of Commerce told The Hill on August 3.


According to the Foreign Policy (“What’s Trump’s Plan?” August 3), the President suffers from “deep-rooted and seemingly unshakeable confusion over what tariffs are and how they work.” For years before his presidential bid and even after the latest announcement, the article says, “Trump has described tariffs as a tax on the other country — when in fact they are a tax on U.S. businesses and consumers, who have to pay higher prices for the same goods.”


Paul Krugman’s op-ed “Trump’s Trade Quagmire” (The New York Times, August 3) also argues that the President is fundamentally irrational: “he’s even less willing than the average politician to admit to a mistake, so he keeps doing even more of what’s not working.” He is also wrong on the assumptions of policy: “the trade war is reaching the point where it becomes a significant drag on the U.S. economy… the Chinese aren’t crying uncle, and the trade deficit is rising, not falling… China seems ‘increasingly confident it can weather the trade wars,’ and it’s not showing any urge to placate the U.S.”


The clue to Krugman’s Weltanschauung is contained in the final sentence of his article: a trade and currency war instigated by Trump would be ineffective, it would lead to widespread retaliation, “and the U.S. would have forfeited whatever remaining claims it may still have to being a benevolent global hegemon.” Lest we forget, the noteworthy term “benevolent global hegemony” was coined by neoconservative gurus Robert Kagan and William Kristol in an article in the summer 1996 issue of Foreign Affairs. It defined the interventionist-globalist party line for the ensuing two decades, with disastrous consequences for America and the world.


Last but not least, the respected Eurasia Group’s critique of Trump’s decision focused on the alleged ability of China to retaliate. It would be “extremely embarrassing” for China to make concessions “under the threat of blackmail,” its analysts wrote. “Trump’s gambit” is unlikely to work because Chinese President Xi Jinping “cannot afford the perception that he has been blackmailed into a deal by Trump, and these threats… likely compound Chinese leaders’ skepticism that Trump will ever be a viable partner for a trade deal.”


In reality, Chinese leaders’ skepticism is immaterial because their ability to retaliate is limited. Last week the Beijing responded to Trump’s decision by imposing 25 per cent tariffs on $60 billion of imports from the U.S.–thus almost exhausting its retaliatory potential. America imported $540 billion of goods from China in 2018, which in turn bought just $155 billion from the U.S. Any future tariff retaliation would be ineffective in comparison. It would need to exclude American advanced semiconductors which are important for China’s economic growth and cannot be obtained from another source, or produced at home, at a short notice. Trump would be most unlikely to oblige.


Another possibility is that China may retaliate by trying to sell some or most of her $1.1 trillion of U.S. Treasury bonds. But far from causing a collapse in bond prices and forcing the Fed to raise interest rates, any such attempt would be certain to alarm private sector buyers. This would enable the Federal Reserve to intervene by buying back its own suddenly undervalued paper. Even if successful, China would be unable to invest its pile of dollars productively. The proceeds would end up in Western banks, which would use the pile to buy… more U.S. Treasury bonds. If the value of the dollar goes down as a result, it would increase U.S. competitiveness and thus make the American market even more difficult for the Chinese producers to dominate as before.


The Chinese leaders may have stalled on a comprehensive trade deal because they hope that a more pliable Democrat will win next year. They are seasoned pragmatists, however, and must be aware that Trump’s resolve would only harden if he wins a second term. In any event, right now the U.S. is in a far stronger position to play the waiting game than China. Her economy is already slowing down due to the existing tariffs, and things can only get worse if the latest 25 percent hike goes into effect. Here at home, the claims that tariffs would end the current economic recovery and significantly increase consumer costs are greatly exaggerated: inflation is in check, unemployment is at a half-century low, wages are rising, and economic growth is continuing to beat expectations. 


My assessment from three months ago still stands: China’s leaders may be preparing for a major confrontation with the U.S. in the fullness of time, but they are not ready for it now. China has been very successful in gaming global trade flows, and she is harnessing her resources for the possible showdown some time later this century. Beijing knows it is too early to up the ante, however. It is my prediction that Xi will work hard to devise a compromise formula which does not look like surrender, and that Trump the consummate negotiator will help him along.


When it comes to America’s standing in the world, in the long term China is far more perilous to the maintenance of pax Americana than Russia has ever been. President Trump’s critics fail to see this big picture. The alleged cost of tariffs to the American consumer, even if calculated correctly, has to be viewed against the incalculable cost of allowing China to continue her meteoric rise unchecked. To use a military metaphor, the global context of U.S.-Chinese relations reduces the issue of tariffs to the level of operations.


At the higher level of strategy, China is the only challenger capable of undermining America’s global position–and Beijing is openly intent on altering the global balance in its favor. While it is self-defeating for the United States to seek open-ended full-spectrum dominance, it is both prudent and possible to check China’s potential bid for hegemony by non-violent means. It is certainly preferable to a belated and potentially destabilizing attempt to do so at a later stage.


Correcting trade imbalances is a time-tested device in the foreign policy-making process. It had been used routinely, and often effectively, many years before the term “international community” was even invented. Beijing has enjoyed an unnatural (never mind “unfair”) advantage for decades, primarily thanks to the dogma of “free trade” which is inherently inimical to any notion of America as a real nation and a living community. 


The elite class, whose scribes now warn us of the dire consequences of Trump’s tariffs, is steeped in the ideology of globalist Gleichschaltung. Accordingly it has presided over the devastation of U.S. manufacturing base, which has gone hand-in-hand with the demographic consequences of its open borders dogma. The cost to this country’s social fabric–and to America’s national security properly understood–has been incalculable.


Whose flag flies over some man-made islands in the South China Sea–or even above the Presidential Office Building in Taipei–is not an issue worth the bones of a single Peorian GI. On the other hand, who makes the bulk of products Americans need every day is ultimately inseparable from the question whose children will inherit their country. This is an issue worth fighting for. Donald Trump seems to intuit that much. His approach to this problem may seem erratic and heavy-handed at times, but it is preferable to any viable alternative.


[Image via: Fletcher6 CC BY-SA 3.0, cropped]