The Case Against the Trade War
In recent years, China’s economy has exploded. It has recorded some of the fastest growth rates in history, and its economy is second only to the United States. Not only that, but it is quickly becoming a dominant military power in Asia and across the world. The current administration has chosen to engage in a trade war with China. Between the two, there have been tariffs placed on over $360 billion worth of goods. Not only is this hurting both economies, but it is harming the voters that put President Trump in power. Our job, as the established world power, isn’t to tear them down while sacrificing ourselves. Instead, we should engage in competition without letting the core of our economy suffer.
To give perspective, Trump’s tariffs on China have been hurting businesses in his own country, as much as they are hurting China. Farmers, for example, are being hurt worst. Chinese companies are canceling contracts and instead of buying produce from other countries, like Canada and Brazil, causing more permanent damage. To heal these wounds and bring back business to the United States could take years or even decades. The government had to pay $12 billion in relief funds to farmers, and still many individuals are struggling to stay afloat. This is only one example of many. From Apple to Walmart to bike manufacturers, American companies have seen loss. And, in all of this, the trade deficit with China has only risen. In fact, China reached a record-breaking trade surplus with the US, reaching almost 35 billion dollars. A trade war is not the way to approach China. Loss in the US should be unacceptable, yet it is growing daily.
China has also implemented an aggressive economic foreign policy initiative, totaling nearly $1 trillion. China has been known to invest heavily in developing countries (largely in infrastructure projects within the country), and then, once the countries are unable to pay back the debt, negotiate a takeover of a military or naval base in their country. These instances are known as debt traps, an increasingly dangerous side to Chinese policy. In one instance, China negotiated a naval base in Pakistan when it was unable to pay back its debts. This gave China access to the Indian Ocean, a new threat to India, a geopolitical enemy to China. The American response to these aggressive moves has been, of course, to initiate a trade war, tearing down both economies. There is a right way to go about competing with China, though, one in which the US would almost definitely succeed. For years, American lawmakers took a backseat to international investment and left it to individual companies to invest internationally and expand American influence. However, a recent bipartisan initiative has been passed in the House and Senate to expand lawmakers’ abilities to invest in developing countries. The BUILD Act (Better Utilization of Investment Leading to Development) creates a new government department, the IDFC (International Development Finance Corporation). The IDFC will be the key to stopping the predatory debt traps and making US influence firm in developing countries all while not hurting our own economy. The IDFC is likely to start running within the next year with a budget of $60 billion to invest in developing countries which China may be targeting. These investments will be successful, as American investment is internationally preferred due to a better reputation and far more flexibility. This should be the future of geopolitical interaction with China, rather than an economic stalemate.
The United States will have success with the IDFC, but the program is far too small. While $60 billion may seem like a large budget, it is practically insignificant compared to the Chinese $1 trillion. Instead of focusing resources on the trade war, the US needs to expand this program and others like it. Not only does it prevent the damage done to Americans, but it preserves our reputation and influence abroad. China will continue to pursue predatory policy in Asia, Africa, and the rest of the world. If the United States doesn’t act soon, its international standing could unravel. However, the future is bright for US foreign policy. The BUILD Act was incredibly successful and supported by both Democrats and Republicans. It is likely that, as trade tensions cool between China and the US, more programs like the IDFC will be created. Either way, the US has a responsibility to confront this growing power. How it goes about the confrontation would determine its future on the international stage.