Winning the Trade War with China

By Richard Morris & Eileen McGann

June 20, 2018 3 min read

The current stock market selloff is a key part of a test of wills between Beijing and Washington that President Donald Trump must win. And we must support him while he battles.

The fact is that according to 2017 data the U.S. sells the Chinese only $130 billion of goods and services and buys $505 billion from them.

The trade deficit of $375 billion with one country (China) accounts for three-quarters of the total U.S. trade deficit of $515 billion. Most of the rest is for oil.

We cannot let this subsidy of China stand.

To do so would be to agree to the creation of a rival economic — and eventually military — power subsidized by our consumers.

Getting off dependence on Chinese low-cost imports is a bit like kicking a drug habit: tough but necessary.

Doing so will cause short-term pain as stocks drop, partly because certain sectors are especially vulnerable and partly because the Chinese are trying to deter Trump by selling stocks on Wall Street.

But the U.S. can, must and will win a trade war.

With more than $500 billion in imports we can punish and only $130 billion in exports they can limit, the math works strongly in our favor.

We need to back Trump and remain patient while the market reacts.

This trade war is a battle for our economic independence. It is the cold turkey we must undergo to end our addiction to Chinese imports.

The political risks Trump incurs by angering the Midwestern farmers and other exporters will be slight in comparison with the incredible economic and political harm he can inflict on China.

The Chinese political structure is predicated on its wealth. If China falters economically, it falters politically. Beijing maintains a huge state sector in its economy that is totally unproductive and exists only because of government subsidies. Its purpose is political — to give tens of millions of people jobs doing stuff they can deceive themselves into believing is real work for real wages.

This chimera will collapse quickly in the face of a trade war.

China is totally dependent on exports and cannot survive politically without them. In reaching a settlement after the dust has settled, we must be mindful of China's bottom line. It needs its exports and it requires its trade surplus to survive politically.

But it doesn't need to be a $375 billion annual surplus. It can be a third of that and still satisfy Beijing's political needs.

Photo credit: at Pixabay

Like it? Share it!

  • 0

Dick Morris
About Richard Morris & Eileen McGann
Read More | RSS | Subscribe