We Need To Take Action Against China, But Tariffs Are A Dangerous Game
On Friday, the New York Times reported yet again that the Trump Administration is preparing a sweeping set of penalties in response to unfair Chinese trade practices. Citing national security concerns related to intellectual property theft, the President intends to impose tariffs targeting over $30 billion of Chinese imports a year in accordance with a recent report by US Trade Representative Robert Lighthizer estimating US losses at that amount.
Unlike the controversial steel and aluminum tariffs enacted two weeks ago (also purportedly due to national security concerns), a strong response to Chinese trade practices widely believed to be unfair has won support from the Republican establishment, notably Senator Orrin Hatch (R-UT), Senator Marco Rubio (R-FL), and former White House Economic Advisor Gary Cohn.
Back in 2015, when Beijing announced a bold initiative called Made in China 2025, it became clear that China is no longer happy with its reputation for manufacturing cheaply made goods en masse. Instead, the Chinese intend to dominate the industries of the future—artificial intelligence, electric cars, advanced computer technology. And in order to help domestic industry catch up with the rest of the world, the Chinese government pursues international trade secrets through intellectual property theft, direct purchase of US companies, and coercion and blackmail. President Trump took a hard line on these practices earlier in his administration, blocking the purchase of San Francisco-based chipmaker Qualcomm by a Singapore-based company. But the new proposals are a step further. The President is correct, China is cheating and its hurting US industry across the globe, but we must decide how much of the bridge we are willing to burn at our own expense.
The proposed tariffs on over $30 billion dollars of imports will certainly hurt demand for imported Chinese products, but it will also defer a portion of those costs to American consumers. CNN estimates that low and middle-income families in the US could incur yearly expenses ranging from $800 - $2200. Free trade has been shown time and again to be the best policy for economic growth, so to abandon it we need to be sure that the Chinese will respond favorably to our efforts. We currently maintain a $385 billion trade deficit with China, making the prospect of a trade war potentially disastrous for US citizens and the world economy as a whole. China knows how to hurt us; they know our economic system just as we know theirs, they know which industries to attack, which politicians to influence, and which trade associations and PACs have clout in Washington. Their retaliation would be real and devastating if our plan is not designed intelligently. Unconditional tariffs are not intelligently designed. Not only would they hurt American consumers, they would also unfairly punish Chinese companies that don't cheat the system, hurting international relationships beneficial to our economy.
There are other, softer options though. The US could deny visas to Chinese scientists or academics looking to work in US industries, apply sanctions to specific companies guilty of stealing US technology, further utilize the World Trade Organization to raise grievances against the Chinese, or even refuse to grant patent protection to Chinese inventors until China agrees to enforce US patent protection.
All of these actions will get the attention of the Chinese without directly hurting American consumers, but they don't have the same effects as the proposed tariffs. If the President hopes to embarrass the Chinese government, the wide-ranging tariffs are sure to be successful, but I would suggest a more careful approach. By staying under the radar and mirroring the covert tactics employed by the Chinese, the Trump Administration will drastically reduce the likelihood of a trade war, a real possibility with expensive and embarrassing tariffs. We can protect American consumers and companies with understated action just the same, it just won't have the effect the President wants.