WASHINGTON: President Donald Trump has many in the US concerned following his strong campaign rhetoric against Chinese trade policy. His appointment of vocal China critic, Peter Navarro, as trade advisor of the new administration indicates extensive changes in the economic relationship between China and the US are in store. Should this position translate into policy, the consequences will have far-reaching repercussions for the American people. The reality the Trump administration must face is that manufacturing jobs in the US are almost entirely dependent on the availability of cheap parts from China to produce products. A reduction in trade with China will force US consumers into paying higher prices for goods across the board.
The consequence of such a move will also invariably result in an increase in the living costs for the average American. Production prices will rise in response to a drop in the availability of Chinese products, resulting in a decline of manufacturing jobs offered to American workers. This two-fold issue of higher living costs and loss of jobs will strike hard at the US middle class. Trump’s main justification for taking such a stance on China’s trade policy is his ostensible goal of boosting manufacturing jobs for American workers. However, his biggest obstacle is not the Chinese trade policy but capitalism itself. Capital will always flow to the places where it can make the most profit for the least amount of investment; in the current economic order, that means places like China, where it is much cheaper than the US to produce many products. For Trump to counter this problem, he must push down wages, reduce corporate taxes and eliminate hard-won labor protections in order to create greater incentives for corporations to remain in the US. Americans got a small taste of what the future looks like with Carrier’s decision to keep their plant in Indianapolis for the price of $7 million in tax breaks.
Whether we like it or not, the US economy is inextricably connected to China. Our prosperity depends on one another and our futures are tied together. The interconnected nature of our trade relationship will become all the more apparent to the US middle class should efforts be made to distance the US manufacturing base from China through protectionism. Chinese policymakers have already met threats of an impending trade war with their own countermeasures. Proposed regulatory hurdles for US corporations like Boeing and Apple are just some examples that could come to pass if a trade war begins. With one of the world’s biggest markets out of the picture, large American corporations will see a fall in revenue and a subsequent loss in the number of jobs they are capable of providing to Americans.
History has proven time and time again protectionism only spells disaster in the long run. The last time global powers pursued such policies to the degree suggested by Trump, a world war ensued shortly thereafter. Conversely, the postwar period demonstrated the crucial role international trade plays in increasing the interdependency of nation-states, thereby, strengthening the incentive of governments to work together for peace and prosperity. While there is no denying that globalization has not delivered on all its promises, the answer is not to throw the baby out with the bath water. The incumbent administration should focus on making globalization work better for the average person, rather than damning it altogether. Trump’s protectionist pipe dream certainly helps win elections. The oversimplification of a complex issue is unfortunately all too commonplace in the liberal democratic world. The Brexit referendum and Trump’s rise to power both rest on the fundamental misunderstanding of globalization. Populists in the Brexit and Trump camps suggest the solution is to withdraw, instead of confronting the problems of globalization, which have left so many Americans understandably angry and confused. Ironically, before Trump, sits a tremendous opportunity to create more jobs domestically by working with Chinese business interests rather than against them. With his recent speech at the World Economic Forum in Davos, Chinese President Xi Jinping made it clear that China is willing to further implement market reforms and increase participation in the global economy. Rather than seizing this chance to create more jobs through increased economic cooperation, Trump appears to be set on punishing China instead.
