◼ ECONOMICS Bloomberg Businessweek November 18, 201936
itscompaniescompeteinternationally—an issue
Beijing is unlikely to budge on.○ FROM GRAND BARGAIN TO MINIDEAL
Despite the diminished expectations, Trump and his
allies are quick to defend his handling of the trade
war. American supply chains have started shifting
away from China, they say, pointing to Apple Inc.
and other companies’ shifting of production to such
places as India and Vietnam. And they are elated
that Trump will also leave in place tariffs on a large
portion of Chinese imports as an enforcement tool
toensureBeijinglivesuptoitssideofthebargain.
Kudlowarguesthata phaseonedealwillreduce
theuncertaintyhangingovertheU.S.economy
whilestartingtoaddressimportantelementsof
therivalrywithChina.“It’sa bigwinforthepres-
ident.Becausehistoughnegotiatingstyleandhis
useoftariffs—bothofwhichhavecomeundergreat
criticism—are paying off.”
Even Navarro touts the strategy in public. “The
great deal President Trump seeks for America,
China, and the world is the deal Ambassador
Lighthizer negotiated in May 2019 but China reneged
on,” he says. That agreement would have addressed
what he calls China’s seven “deadly structural sins,”
including its industrial subsidies and its dumping of
low-cost products in the U.S. He also argues Trump,
“as a master negotiator,” will ensure further phases
happen. “Of course I support the president in pursu-
ing this strategy because it helps the American econ-
omy and American farmers, ranchers, and workers.”
Critics, on the other hand, point to a U.S. trade
deficit that’s on track to end 2019 some $150 bil-
lion larger than at the end of 2016, on the eve of
Trump taking office. And they argue that the tariffs
and export restrictions his administration has put
in place have, if anything, reinforced Beijing’s deter-
mination to outpace the U.S. in critical areas such as
artificial intelligence and biomedicine.
Trump’s phase one deal, if it happens, “will not
alter China’s ambitions,” says Charlene Barshefsky,
who negotiated China’s entry into the World Trade
Organization under President Bill Clinton. Rather
than using protectionism and industrial policy to
give American businesses a leg up, the U.S. should
be investing in education, research, and infrastruc-
ture to boost its own competitive position. “We’ll
never out-China China,” she says. “And if you spent
10 minutes in the country, you’d know that.”
Democrats looking to challenge Trump in 2020
will likely portray a phase one deal as caving. Yet,
for better or worse, he has embedded the view
of a malign China in Washington. Candidates
from former Vice President Joe Biden to SenatorElizabethWarrenagreetheU.S.hastotakeon
Beijing, though they find fault in Trump’s tactics.
Notably, none of the front-runners have commit-
tedtoremovingtariffsonChina.
A U.S.businesscommunitythatwantsbotha
short-termendtotheuncertaintyandlonger-term
fundamental changes in China’s economic gover-
nance is also wondering if it was all worth it. “What
we all need now is a trade truce,” says Myron
Brilliant, who heads the international division at the
U.S. Chamber of Commerce. Whether the fight will
prove worth it “will depend on what comes next.”
Many China experts argue Trump’s approach
was too improvised and forced allies into a
“you’re either with us or against us” equation
that is divorced from the economic and business
realities they face. “We’re in a political era of sim-
ple solutions at a time when these really require
complicated and coordinated actions,” says Jude
Blanchette, an expert on Chinese leadership pol-
itics at the Center for Strategic and International
Studies, a Washington think tank.
Irwin, the Dartmouth professor, says an histori-
cal reference point is the War of 1812—which the U.S.
waged against an England that was by far its larg-
est trading partner and a predatory one to boot.
One slogan touted at the beginning of that conflict,
he says, was “on to Canada!”—a promise to annex
new territories. When the war ended with a return
to preexisting boundaries, the parameters for vic-
tory changed: “You know what our slogan was after
the war? ‘Not one inch of territory ceded!’ ” Trump
and his aides “launched the trade war against China
and said, ‘We are going to remake the economy and
get the state out of industrial policy and mercantil-
ism,’ ” Irwin says. “We are ending it by saying, ‘They
are buying just as much stuff as they did before.’ ”
�ShawnDonnanandJennyLeonardTHE BOTTOM LINE What began as a well-plotted strategy to
force China to an even playing field for U.S. exporters and investors
has devolved into an improvised approach with modest goals.DATA:U.S.CENSUSBUREAUU.S.GoodsandServicesDeficit
Actual Bloomberg forecast
Trumpera2009 2019$600b3000“We’re in a
political era
of simple
solutions at
a time when
these really
require
complicated
and
coordinated
actions”