Getting tough with China could prove costly and dangerous.

Share story

Donald Trump wasn’t the first presidential candidate vowing to get tough with China. The difference is that, once elected, his predecessors backed down. It’s unclear whether that will happen this time, and that should get everyone’s attention.

Trump is friendly with Chinese President Xi Jinping — he likes strongmen, and Beijing has endeavored to flatter Trump. But his administration has taken a hard line. For example, it initiated a case against Chinese aluminum imports, claiming China was dumping (selling the commodity for less than fair value) in the United States. This was the first self-initiated such action by the Commerce Department in more than 30 years and could result in countervailing duties when the investigation concludes in April.

A more significant action is the administration’s probe into discriminatory intellectual property practices by Beijing. This began in August and continues. But it has unsettled China enough that officials there warn it could trigger a trade war.

China is Washington state’s largest export destination. While overall exports have been down this year, those to China have risen to $15.7 billion through November, more than a billion dollars higher than in the same period in 2016. (With China’s slowdown, this is still lower than the $20.7 billion in all of 2014.) Aircraft dominates, but agricultural products and vehicles also figure high. The data come from WISERtrade, a Massachusetts company that collects information on trade flows.

A trade war, with tit-for-tat tariffs or even closed access to American companies, would hit Washington and all export-oriented states hard.

The damage wouldn’t stop there. Every American consumer who has grown accustomed to buying cheap stuff from China would pay more. American companies that lose Chinese business — and we’re talking about the world’s second-largest economy — would lay off workers here. Chinese investment that is seeding manufacturing here would dry up. The strategic consequences of a rising nuclear-armed power, determined to undo its “century of humiliation,” confronting the superpower are profound. Then there’s North Korea.

It’s not as if the “get tough” candidates are entirely wrong. China does engage in discriminatory trade practices (currency manipulation is the least of them). Among the most serious involve intellectual property: Demanding American companies set up shop in China and share technology, as well as lax IP protections, piracy and censorship. U.S. companies, seeking cheaper labor and access to the world’s largest economy, also made this bed of vulnerability.

The problem is that the two countries’ economies are so intertwined that getting tough for real becomes impossible once the candidate becomes president.

Until now.

Now, as with so much else, we are in uncharted territory. If rhetoric turns into action, it won’t just be a one-day story, even on social media.

——————————

Today’s Econ Haiku:

To break up GE

And sell it off for spare parts

Light up Wall Street greed

——————————