The opening salvo in this trade war was the immediate rejection of the Trans-Pacific Partnership (TPP), which I wrote then was a mistake. The Administration looked only at the raw commercial aspect of the TPP, ignoring its wider significance, especially the economic containment of China. It was a clear rejection of geo-politics as part of trade policy.
There is no disagreement that it is time to update our many trade agreements. For example, the NAFTA agreement is 24 years old and does need updating. However, I've written before that it is worrisome that we are trying to renegotiate our many bi-lateral and multi-lateral agreements -- all at the same time.
In particular, I'm worried about our bi-lateral negotiation with China, the world's second largest economy. Our logic has been that our larger economy gives us a greater capacity to suffer economically. After all, $50 billion is a smaller percentage of the U.S. economy that the Chinese economy. Also, timing is thought to be on our side as our economy is booming, while the Chinese economy is somewhat sluggish. (Unfortunately, the most recent data shows their economy is picking up.) Their stock market has already entered bear market (down 20%), which is attributed to trade war fears. Our President cares about the U.S. stock market, while the Chinese president Xi is immune to any pressure from the Shanghai stock exchange.
Other differences in perspective also matter. The Chinese always take the long-term view, and trade negotiations normally take a very long time. The Chinese are not motivated by any short-term WIN, which makes for good TV. In addition, their leaders are in a better position of political strength. Their hold on power is undoubted. While Trump's political strength has increased significantly in recent months, imagine how that would change if there is a "blue wave" in November and Mueller's investigation is damning. That is a strong motivation to conclude our trade negotiations sooner than later. Long-term thinking versus short-term thinking? Undoubted political strength versus tenuous political strength?
What, indeed, is in Pandora's box? Who knows?
There is no disagreement that it is time to update our many trade agreements. For example, the NAFTA agreement is 24 years old and does need updating. However, I've written before that it is worrisome that we are trying to renegotiate our many bi-lateral and multi-lateral agreements -- all at the same time.
In particular, I'm worried about our bi-lateral negotiation with China, the world's second largest economy. Our logic has been that our larger economy gives us a greater capacity to suffer economically. After all, $50 billion is a smaller percentage of the U.S. economy that the Chinese economy. Also, timing is thought to be on our side as our economy is booming, while the Chinese economy is somewhat sluggish. (Unfortunately, the most recent data shows their economy is picking up.) Their stock market has already entered bear market (down 20%), which is attributed to trade war fears. Our President cares about the U.S. stock market, while the Chinese president Xi is immune to any pressure from the Shanghai stock exchange.
Other differences in perspective also matter. The Chinese always take the long-term view, and trade negotiations normally take a very long time. The Chinese are not motivated by any short-term WIN, which makes for good TV. In addition, their leaders are in a better position of political strength. Their hold on power is undoubted. While Trump's political strength has increased significantly in recent months, imagine how that would change if there is a "blue wave" in November and Mueller's investigation is damning. That is a strong motivation to conclude our trade negotiations sooner than later. Long-term thinking versus short-term thinking? Undoubted political strength versus tenuous political strength?
What, indeed, is in Pandora's box? Who knows?
