Manufacture This

The blog of the Alliance for American Manufacturing

It appears "the source of (Trump's) policies" are a little hard to discern.

Are they really gonna do this, or what?

That’s the boiled-down question Chinese government officials are asking (when put through the Matt McMullan translator) about the Trump administration’s intention to force a confrontation over China’s trade policies – and particularly its Made in China 2025 plan, which will line up loans and subsidies so Chinese companies can buy up foreign competitors in emerging industries. First up are a number of tariffs on products tied to alleged intellectual property theft, as well as those in place against steel and aluminum imports.

The New York Times reports there’s confusion among senior Chinese Communist Party leaders as to how to respond to the Trumpian policy shift, for a variety of reasons. Among them:

  • Potential President for Life Xi Jinping may have already concluded that “Mr. Trump is bluffing and that the United States will back off, as it has in the past.”
  • Nobody wants to tell Xi – who is hardly eager to roll back China 2025 and has “personally taken control of decision-making in the trade standoff” – news that contradicts his decision-making.
  • And many of Xi’s chief advisers have proven ill-equipped to analyze (and predict) President Trump’s trade policy decision-making. And China’s typical Washington contacts – “often establishment figures with backgrounds in international finance and diplomacy” – have little sway with this White House.

Chinese officials are having trouble reading this guy.

Trump, to these guys, is hard to read. They probably plotzed when Trump told a room full of farm-state lawmakers that he’s considering getting the United States back into the Trans-Pacific Partnership. That’s fair. Nobody saw that coming in DC either! And while the deal as-is should be improved upon, returning to it would be a big deal, particularly for China.

Anyway, an interesting column over here argues it’s in China’s favor to be beneficent in this current trade confrontation. Mohamed El-Erian says trade liberalization would help its massive economy avoid the middle income trap, and would increase its role as a credible global leader – both long-term goals of the Chinese state.

We're gonna see if they take that advice in real time. As for the United States? Now’s now the time to blink. Even if half the country reflexively loathes the president and his own party’s establishment has to tap dance around this issue, this issue must be forced.

Alliance for American Manufacturing President Scott Paul explained why this week at a U.S. House Ways and Means Committee hearing:

We view the possibility of tariffs as a necessary step to achieving real progress, which includes reforming anti-competitive practices and reducing market-distorting behaviors.

Withdrawing the threat of tariffs without achieving results would be tantamount to waving a white flag; signaling to China and others that there will be no consequences for predatory trade behaviors. If a negotiated solution with specific disciplines and automatic enforcement provisions can be agreed to, then — and only then — should we look at lifting tariffs. Otherwise, we would be abandoning the best leverage we’ve had in years.

Read the whole rundown on the confusion at the heights of China's government here.