Finally, A China Strategy That Might Work

The U.S. and China are racing to craft some kind of trade agreement before March 2. Or else Trump says he will impose stiff new tariffs.

He apparently thinks the tariff threat gives him leverage against China. I’m not sure he’s right.

am sure, though, his tariffs are already damaging the U.S. economy. More tariffs will cause even more damage.

It’s true—China does have some unfair policies, and previous negotiations haven’t solved them.

But if shooting yourself in the foot doesn’t help, shooting the other one won’t help either.

Why not try something completely different?

Hurting Our Own Side

If not with tariffs, how do we get China to change its ways?

I offered one answer back in October. The U.S. should rejoin the Trans-Pacific Partnership that Trump pulled out of.

That would counterbalance China’s economic strength and encourage Beijing to play more fairly. Plus, U.S. businesses would have more export markets.

The drawback: This would take time. The U.S. has been patient with China, maybe too patient. So, the Trump administration decided to use tariffs as a stick instead of TPP as a carrot.

China may indeed change some of its practices in order to escape tariffs. However, that’s also taking time.

Worse, it’s hurting our own side. Trade war drives up costs for everyone and makes some exporters lose business.

Collective Punishment

Again, I fully understand that we need to do something. But tariffs aren’t the right weapon for this purpose.

Tariffs, as they are now, are really a form of collective punishment. They intentionally hurt everyone, even innocent bystanders, as retribution against the smaller number who did something wrong.

Because some Chinese companies don’t play fair, we impose tariffs on all Chinese companies. Which also punishes their U.S. suppliers and customers.

This is roughly equivalent to the police citing every driver on a certain road because some people exceed the speed limit there.

It might work… but it’s far better to identify and punish the violators, leaving the bystanders alone.

The Trump administration may finally be getting this.

Take It to Court

Last month, the U.S. Justice Department filed criminal charges against Chinese telecom company Huawei and one of its top executives.

One of the alleged crimes: stealing intellectual property from T-Mobile. (Huawei denies the allegations.)

I think this is a much better approach.

If there’s evidence a company is breaking US law, hold that particular company accountable using well-tested legal processes. Our judicial system, while hardly perfect, is generally transparent and fair.

The DOJ must think it has enough evidence to convict Huawei. If so, it can probably use the same methods to charge other offending Chinese companies. Do that enough times, and Beijing will get the message.

Better yet, it could achieve our trade goals without punishing U.S. consumers and businesses with tariffs.

Trade War Off-Ramp

So if the president were to seek my advice (sadly, he hasn’t) on trade policy, I would suggest this:

  • Drop all the new tariffs and stop threatening more of them.
  • Start negotiations to join the Trans-Pacific Partnership, minus the problematic parts that made him withdraw.
  • File more criminal cases against Chinese companies like Huawei—as many as possible, which will depend on finding evidence. So aggressively look for it.

This would greatly reduce the collateral damage against U.S. businesses and consumers. Meanwhile, it would give China an incentive to change its policies and regulate its own companies.

I’m not optimistic any of this will happen. Trump appears to view the criminal charges as an adjunct to his tariffs, not a replacement strategy.

He might even raise tariffs again in March if the current talks don’t go well.

Nonetheless, there is an off-ramp from the trade war. Let’s hope the president takes it. Our economy depends on his choice.

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