By John J. MetzlerA flurry of accusations, finger pointing and political grandstanding dominate the headlines as the trade war with China escalates.
Global markets responded with roller-coaster fluctuations, and serious jolts, amid growing economic uncertainty.
Talk of escalating tariffs is in the air as major trading partners square-off for wider economic showdowns.
As usual China plays the victim in responding to robust American tariffs which are less about teaching Beijing’s policymakers a lesson than opening the discussions for overdue and serious rounds of trade and technology talks. Indeed the world’s two largest economies seem to be setting up guardrails for managing an annual bilateral $600 billion trading relationship which threatens to go off the rails.
On the surface, China will “stay confident, remain calm, and focus on managing its own affairs,” said leader Xi Jinping, stressing that the People’s Republic’s development “has never relied on the goodwill of others.”
Without question, the Trump Administration views the People’s Republic of China as the United States’ primary adversary, not only in military terms, but especially in economic power.
Yet contrary to the former Soviet Union, contemporary China has both a serious military capacity but even more so a much stronger economy of scale and through its export access, and the power to devastate foreign manufacturing and jobs.
While I’m not a big fan of tariffs there comes a time when the other medicines don’t work.
Currently, American tariffs of 145 percent slapped on China exempt Smart phones, semi-conductors, computers and some tech items. China raised duties 125 percent on U.S. products.
While tariffs clearly echo both protectionism and invite retaliation, the sober reality remains that China has long used and abused its global trading regime to tilt the commercial scales in its favor.
Beijing’s entry into the World Trade Organization (WTO) after a lengthy process during the Clinton Administration, opened the floodgates for China’s commerce on steroids.
American consumers have become dangerously dependent not only on the proverbial cheaper “made in China” products, but businesses rely on supply chains sourced in China.
Indeed, glaring trade abuses by Beijing are nothing new; what’s new is that the USA has said No More. Leverage is Donald Trump’s game plan here.
Most people know U.S./China commerce has long been lopsided in China’s favor. But let me illustrate what the China Trade has really cost us.
First a bit of history.
Trade Relations with China Since the Communist Party Took Power
Following Mao’s conquest of the China Mainland in 1949, Washington maintained a trade embargo on Beijing during the Cold War years from the 1950’s to 1972.
Interestingly, American commerce with China actually flourished before WWII. But following President Richard Nixon’s landmark visit to China in 1972, the U.S. cautiously lifted trade restrictions, but did not formally establish diplomatic ties.
In 1972, the first year of U.S./China direct trade the volume was $96 million.
By the time President Carter opened diplomatic relations with Beijing in 1979, two-way trade stood at $1.2 billion.
Deng Xiaoping 'Reform Era'
Here’s where it gets interesting during China’s reform era under Deng Xiaoping, which mixed Marxism with Market reforms.
In 1985 two-way trade stood at $7.7 billion with a mere $6 million U.S. deficit. But by 1990, the year after the communist crackdown in Tiananmen Square, the import/export trade numbers reached $20 billion with a $10 billion U.S. deficit.
By 2000, two-way trade with China reached $116 billion with $84 billion in Beijing’s favor!
By the 2000’s and after the radical Islamist terrorist attacks on America on September 11, 2001, the USA increasingly regarded China as a more responsible major player.
West Falls For 'China's Peaceful Rise' Narrative
Policymakers, academic conferences, and business circles echoed Beijing’s catchphrase “China’s Peaceful Rise” as a Greek chorus of wishing what you want.
Equally communist China’s growing economic prowess, the “Rising China” paradigm, facilitated Beijing’s military buildup. It also facilitated China’s power and access into an American market and as importantly the hollowing out of key strategic U.S. industries and the corresponding loss of millions of American industrial jobs.
By 2010 our bilateral trade stood at $457 billion with a whopping $273 billion deficit to Beijing!
And by 2015, just a decade ago the numbers had jumped to $599 two-way trade with a $367 billion surplus for Beijing! The trade deficit fever broke a few years ago with a slight lowering of deficits due to aggressive American export promotion and policy pressures. In 2023, the U.S. deficit was $279 billion but in 2024 a formidable $295 billion.
Free and Fair trade is good and should be the goal, but the problem is that the trade hasn’t been Fair. This is hardly a new phenomenon but illustrates an entrenched mercantilist system against the level playing field. It’s now time to play fair.
John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of Divided Dynamism the Diplomacy of Separated Nations: Germany, Korea, China (2014).
Free Press International
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