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Sorry, Donald, You Can't Out Oppress the Chinese

Bad news, bro.

You can’t blame the president for trying to squeeze the Chinese—they appear, at first look, to be the perfect Trumpian mark. Despite its recent rise, China remains a poor country, with a per capita income of roughly $15,000 when adjusting for purchasing power, four times smaller than the United States. The Chinese economy is also much more dependent on exports to the United States than the U.S. is dependent on exports to China. A desperate man who has a lot on the line is the sort of man Donald Trump likes doing business with.


But the president is likely to learn in the coming months that he isn’t actually negotiating with the poor Chinese worker whose job is dependent on exporting washing machines to America. He’s negotiating with Xi Jinping and the Communist Party of China, which built a forty-year development strategy around suppressing worker wages and household wealth to subsidize its historic infrastructure buildup and massive export sector.

For years China kept its currency artificially undervalued, which sapped its consumers of purchasing power and made them poorer than they otherwise would be. To this day it maintains policies of financial repression, whereby it forces low interest rates on Chinese savers so that Chinese banks can offer low-interest rate loans to favored businesses and strategically-important industries. And though China has made strides in environmental protection in recent years, its rise has been built in part through environmental degradation, the effects of which are borne by the average Chinese.

The trade war will not leave the Chinese economy unscathed — far from it. Chinese firms like WH Group Ltd., which owns U.S. based meat processor Smithfield, are already feeling the effects of higher pork prices as a result of threatened tariffs. A recent study from Purdue University estimated that the effect of proposed soybean tariffs on U.S. producers will be as much or more damaging to China than the U.S., as Chinese demand for feed grains like soybeans and sorghum skyrocket in recent years. And a Moody’s analysis released Wednesday described the pain that Chinese manufacturers and processors of metal products are already feeling from new U.S. levies.

But Xi Jinping has the means to direct new subsidies to endangered companies, if he so chooses. And workers who lose their jobs or businessmen who lose revenue as a result of the trade war simply have less recourse to make their pain felt by their leaders. President Trump, on the other hand, is already being deluged with complaints by leaders of his own party, and constituents in key battleground states, that even the threat of Chinese tariffs is proving ruinous.

And the president has little wiggle room. Losing Republican majorities in either the House or the Senate could be fatal for the president, whose chances in 2020 could be torpedoed by facts uncovered by a Democratically-led Congressional investigation into his business practices and ties with foreign governments. The president has long had it in for China, but his instincts for self preservation will win out in the end (assuming he apprehends the best strategy for saving his own skin, which, in fairness, is to be determined).

Given these dynamics, it’s hard to see the president allowing proposed Chinese tariffs to go into effect in the weeks leading up to election day, as they likely will if China ultimately follows through with his threats. If he does, the political ramifications could be such that he’s not in office much longer to keep the trade war going anyway. The Donald wants to stick it to Chinese workers, but what he didn’t realize is that the Chinese government doesn’t care—they’ve been doing it for years.

Christopher Matthews is a writer who splits his time between New York City and Accra, Ghana, with an interest in the intersection of markets, the economy, and public policy. He previously held staff positions at Axios, Fortune Magazine, and Time Magazine, and has been published in Forbes and Debtwire.


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