At the end of World War II the world lay in ruins from Europe to Asia. Instead of exacting retribution, the U.S. gave away much of its wartime developed manufacturing to other countries to help them rebuild their economies.
Part of the process was allowing developing countries to level tariffs against American products to protect their growing economies. Seventy years later the world is much healed but many of the tariffs are still in place and we’ve run trade deficits for decades because of them.
China entered the World Trade Organization under Bill Clinton, and has aggressively cheated since then. Its state-run economy has been protectionist by: manipulating its currency to make its products cheaper, demanding that U.S. companies working in China accept Chinese partners who have access to any and all trade secrets, and engaging in intellectual property theft that costs America billions a year.
China “dumps” overproduced products into our markets, making it uneconomical for us to produce those products for ourselves (steel, for example), thus hollowing out our manufacturing ability while putting thousands of Americans out of work.
President Trump is trying to stop this abuse and level the trade playing field by lowering anti-American tariffs around the world. He’s doing this by applying American tariffs against those countries that have traditionally resisted our imports, and by doing so, bringing them to the bargaining table.
This strategy has already worked with the European Union, and will work with Mexico. Raising wages for Mexican workers will make some product manufacturers more likely to use American workers. And it will work with China. The E.U. is now trending to join with the U.S. in resisting unfair Chinese economic domination.
The short-term cost to us is caused by Chinese resistance to fair and reciprocal tariff-less trade, but negotiations are in the process. China has a lot to lose by playing fair, so expect stubbornness, but in the end reality will prevail, and long-term economic benefits will be substantial.
Richard La Motte