We Just Lost the Trade War with China

  1. The $200 B plan to buy US products is the more publicized but murkier part. The purchases are spread over two years and are allowed only in specific, politically-advantageous sectors. Since there is no notion of market reform, it is unclear who is doing the buying, or how the sector targets can work. What’s more, given the arbitrary level of the targets and the fact that either party to the agreement can just opt out, there is little actual skin in the game. It is significant that nothing will be known about real progress until after the election. Overall the $200B figure is highly inflated at best; at worst this is an electoral show for Trump voters in the designated sectors.
  2. The rest is a collection of statements of principle with no language for enforcement. Whether the Chinese will or won’t comply will be on their terms not ours. This is entirely parallel to what we got on denuclearization from the North Koreans. There is no substantive progress on any of the issues targeted by the trade war.
  1. We didn’t get tough, we got weak. We abandoned our allies to get ourselves an exclusive deal. We lost half our leverage, and suffered the consequences. That’s what happens when you just assume overwhelming power.
  2. We didn’t cave in before, we got results instead of pain and bluster. Under Obama both the balance of payments deficit and intellectual property theft were reduced significantly-instead of the opposite. We also made important progress (some since reversed) with climate change. The job wasn’t finished, but for all the chest-beating, we’ve gone backward since. It should also be noted that essentially 100% of the job loss from Chinese competition occurred under George Bush or as a direct result of his 2008 crash. Nothing prevented action on currency manipulation other than the distraction of our then-current war.

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