As a former US negotiator Harry Broadman looks with shock at how US president Trump is using his tariffs to get his trade policies in place. For Forbes he describes what has been going wrong at the misinformed White House.
Regrettably, for Mr. Trump, there are other constituencies of his base throughout America’s heartland, Rustbelt and elsewhere that are feeling as much pain as farmers from his 2018 tariffs—or will do so shortly as the bite of his newest wave of tariffs kick in.
Perhaps saddest of all is the fact that imposing tariffs on merchandise imports—the president’s choice, if not sole, instrument to seemingly induce WTO-sanctioned “behind-the-border” reforms of China’s economic regime, such as a hold by the state on the free play of prices, weak protection of intellectual property, provision of huge subsidies to state-owned enterprises by state-owned banks that only pretend to require debt repayments, and artificial barriers to market entry and exit—simply will not work.
We Americans are willing to endure pain for gain. But let’s not fool ourselves into thinking as Mr. Trump does, that simply eliminating our bilateral merchandise trade deficit with China, which in and of itself is not an economically meaningful objective but which his tariffs may well do, will alter the core of China’s conduct in the global trading system.
In a nutshell, no matter how high or expansive are tariffs, they will not create effective incentives for China to execute the fundamental market-oriented reforms Beijing legally obligated itself to undertake in its 2001 WTO Accession Agreement. That is the real endgame.
Achieving that goal–necessitating a reduction in the fundamental role of the state in China’s economy, which of course Chinese President Xi Jinping is loathe to do since that is the raison d’etre of the Communist Party–is a wholly different matter. That would require both using a different arsenal and employing a fundamentally different strategy, especially marshaling a multilateral coalition of the world’s leading trading partners. Our president seems to be moving us further away from that path each passing day.
Harry Broadman will be in London on June 27-30 and in Edinburgh July 1-3.
Do you need more experts on the ongoing trade war between China and the US? Do check out this list.