China is winning the trade war Trump started
You can see it in the economic numbers: China's economy grew by an average of 5.3 percent in the first half of the year, America's by only 1.25 percent. You can see it, too, in Trump's failure to wring significant concessions from Beijing. While most countries have acquiesced to U.S. trade bullying, China has not. In April, Trump hiked U.S. tariffs on Chinese goods to 145 percent. China retaliated with 125 percent tariffs on U.S. goods. Then President Xi Jinping ramped up the pressure by restricting exports of rare earth metals to the United States, threatening to halt production of everything from cars to fighter jets.
Trump had to back down, agreeing to cut U.S. tariffs on Chinese goods to 30 percent, while Chinese tariffs on U.S. goods were reduced to 10 percent. Tariffs remain frozen at those levels despite several rounds of Washington-Beijing talks. Trump tried to market this agreement as a 'historic trade win,' but it was simply a truce. It did nothing to address long-standing U.S. complaints about China's dumping of products on the world market, theft of intellectual property and other offenses.
Though the lopsided tariffs on Chinese imports might not seem so bad (until you realize they will mean higher prices for U.S. consumers), it's evident that as part of the deal — whose details have never been released — the Trump administration has essentially paused export controls on selling sensitive technology to China.
In July, the administration approved the sale to China of Nvidia's advanced H20 chips, which have military as well as civilian applications. A bipartisan group of national security hawks, including former Trump administration officials Matt Pottinger and David Feith, signed a letter expressing outrage: 'We believe this move represents a strategic misstep that endangers the United States' economic and military edge in artificial intelligence (AI) — an area increasingly seen as decisive in 21st-century global leadership.'
The sale of the Nvidia chips is only the latest indication of Trump edging away from his confrontation with China. The administration has also blocked visits to the United States by Taiwan's president and defense minister following Beijing's objections.
While conciliating Beijing, Trump has been alienating U.S. allies in the Asia-Pacific region with his capricious tariff threats. The latest to suffer is India, a key U.S. partner in confronting China. Trump announced Wednesday that he was hitting India with 25 percent tariffs, to be followed by additional sanctions to punish India for buying oil and gas from Russia. It makes sense to pressure India to reduce its economic relationship with Russia, but these blunderbuss tariffs threaten to undo decades of efforts by American administrations, including the first Trump administration, to draw India into the U.S. orbit. Now there are signs of a reconciliation between New Delhi and Beijing.
Trump has struck agreements with other key U.S. partners in the region to tax their exports at a rate lower than he threatened in April — but still much higher than they faced at the beginning of the year. Trump has imposed 20 percent tariffs on Vietnam and Taiwan; 19 percent on Indonesia, Malaysia, Thailand and the Philippines; and 15 percent on Japan and South Korea.
Australia, one of America's closest allies, gets a 10 percent 'baseline' tariff but 50 percent tariffs on steel, copper and aluminum and 25 percent on certain vehicles. As part of his trade negotiations, Trump has extracted vague promises from Japan and South Korea (along with the European Union) to invest hundreds of billions of dollars in the United States.
The countries that have done trade deals with Trump can breathe a sigh of relief, knowing that their situation could be much worse. But Trump's bullying is leaving hard feelings in its wake. One former Japanese trade official called the U.S. deal 'humiliating,' while a Japanese economist called it 'completely unacceptable for Japan.' That's an odd way to treat allies that the United States needs to contain China.
More broadly, Trump is helping China with his cutbacks to U.S. diplomacy, foreign aid and investment in scientific research. Secretary of State Marco Rubio has even fired the State Department staffers who coordinate the diplomatic response to China's aggression in the South China Sea.
Trump's attempts to close down Voice of America are another gift to Beijing. From Indonesia to Nigeria, Chinese state media is filling the vacuum left behind by VOA. Trump's decision to walk away from the World Health Organization and UNESCO has also opened the door for China to increase its influence in those international organizations.
Then there are Trump's plans to cut federal support for scientific research by more than 30 percent while making it harder for foreign students to attend universities in the United States. This comes as China is pouring additional billions into cutting-edge research and development. China already leads the United States in most frontier technologies, including batteries, solar panels, electric vehicles, drones, advanced optical communication systems, machine learning and high-performance computing. Trump's tariffs will do nothing to reverse these trends, while his cutbacks to R&D spending and restrictions on foreign students will only accelerate them.
China's Achilles' heel has long been the fear it engenders with its aggressive behavior and lack of respect for other nations. Now, America is acting a lot like China and paying the price in global opinion. The Pew Research Center, in a recent survey of 24 nations, found that 'views of the U.S. have turned significantly more negative over the past year, while views of China have turned slightly more positive.' In the high-income countries surveyed, 32 percent now have a favorable view of China, compared with 35 percent holding a favorable view of the United States. For those of us accustomed to thinking of America as the good guy, that's a shocking convergence.
Don't get me wrong: It's a good thing Trump is backing away, at least for now, from his costly trade war with China before it inflicts inflict serious damage on the U.S. economy. And, to his credit, Trump is continuing, and even enhancing, military cooperation with U.S. allies in Asia.
But the trade war truce is only limiting the harm from Trump's policies; it isn't challenging China's growing power or enhancing U.S. competitiveness. Trump's tariff hikes, budget cuts and immigration restrictions are weakening America and inadvertently strengthening its chief rival.
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