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Tariffs Are a Necessary Response to China's Intransigence: Op-Ed

May 13, 2019
Beijing has run roughshod over our economic well-being.

The talking heads at CNBC are panicked right now about the higher tariffs President Donald Trump just imposed on China. But we’ve heard their alarmism before, along with frightening economic predictions.

The stock market did take a small dip this week in response, but the Dow is still above last year’s highs. And what matters is that the real economy — where most of us make a living — is doing well, with historically low unemployment, low inflation, and strong growth.

Why the hysteria about China? The Trump administration just spent months negotiating a seven-chapter trade deal with Beijing. The resulting agreement was intended to address the very trade disputes that compelled the president to take a hard line on China in the first place: intellectual property theft, hacking of trade secrets, forced technology transfer, trade barriers, and currency manipulation.

These are longstanding challenges that prior administrations failed to address — predatory trade practices that Beijing has continually used to seize market share from U.S. producers. The resulting carnage has been evident for two decades now, with 3.4 million U.S. jobs lost to China between 2001 and 2017, and a goods trade deficit that clocked a stunning new record in 2018 of $419 billion.

These are legitimate grievances that both Sen. Chuck Schumer (D-N.Y.) and President Trump agree on. Beijing has unilaterally cheated its way to the top — particularly with the rampant theft of intellectual property from iconic American companies like U.S. Steel, American Superconductor, and J.P. Morgan. And the U.S. middle class has seen the results, with more than 60,000 factories closed.

What was Beijing’s response to President Trump? The Chinese negotiating team returned a 150-page draft agreement last week that reversed most of their prior commitments. As Reuters reported, “In each of the seven chapters of the draft trade deal, China had deleted its commitments to change laws to resolve core complaints that caused the United States to launch a trade war.”

In other words, and even after 10 months of tariffs from the Trump administration, Beijing simply said “Forget it.” Or, as Reuters noted, Beijing chose to “blow up months of negotiations” with “systematic edits” to nearly the entire document.

On Sunday morning, President Trump announced his response: Tariffs of 25% would continue on $50 billion worth of Chinese imports. And the current 10% tariffs on another $200 billion worth of goods would be raised to 25%.

With that, commentators exploded in misleading talk of “protectionism” — but no condemnation of Beijing. Notably, the increase in tariffs was originally slated for last January. But the president had delayed it in an ultimately futile effort to meet Beijing halfway.

Some in the Trump administration hoped for altruism from Beijing. But President Xi has now turned the trade “doves” against him by once again reversing past promises. And he underestimated the resolve of President Trump.

Strangely, though, the chattering classes continue their role as China apologists. Once again they’re resorting to apocalyptic warnings about tariffs — even though previous predictions proved groundless.

Critics of President Trump are letting political passions run ahead of economic common sense. China’s predatory capitalism and military aggression bear shades of the Soviet challenge during the Cold War.

Take the aluminum and steel tariffs that the president imposed in March 2018. Trade Partnership Worldwide warned that a staggering 470,000 U.S. jobs would be lost. But federal data shows US GDP grew at an impressive 3.5% in the 3rd quarter of 2018 — after the tariffs had taken full effect. Since then, U.S. manufacturing employment has increased, and now exceeds 12.8 million jobs — the highest level since the Great Recession. Inflation remains low, demonstrating that consumers aren’t seeing price increases. And robust job growth continues, with both steel and aluminum producers hiring and expanding operations.

Simply put, there is no tariff armageddon. Wages and purchasing power are up. But consumer prices aren’t.

Critics of President Trump are letting political passions run ahead of economic common sense. China’s predatory capitalism and military aggression bear shades of the Soviet challenge during the Cold War. And there are serious national security implications to years of rampant hacking and the loss of domestic production in everything from auto parts to information technology. Yes, we’ll hear more cries of “the sky is falling.”

But those same voices were strangely absent when China steamrolled U.S. interests.

Now, standing up to China is absolutely justified — and long overdue.

Michael Stumo is CEO of the Coalition for a Prosperous America, a nonprofit organization working at the intersection of trade, jobs, tax and economic growth. CPA is nonpartisan and represents American domestic producers, manufacturers, ranchers, organized labor, and farmers. This commentary originally appeared on the CPA website, and is used with permission.

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