America Doesn't Have The Stomach For Trump's Trade War

It's summer, man, we ain't got time for this.
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President Trump’s capitulation to the Chinese only surprising in that it was so complete. In exchange for lifting the threat of new tariffs on $150 billion worth of goods, the president received nothing besides vague assurances of increased purchases of American agriculture, something that rapidly rising demand would have necessitated anyway.

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One must give credit to Chinese negotiators, who wisely realize they have nothing to gain from taking Trump’s tariff threats seriously until the American electorate signals its support for the trade war over the course of at least another election cycle. And let’s also credit Donald Trump’s predecessors. It turns out that they’re probably not as stupid as the president thinks, and that lopsided terms of trade between China and the U.S. hasn’t resulted from incompetence, but from game theory dynamics in which it benefits the typical American for U.S. policymakers to simply ignore them.

While it’s true that the United States and Europe mishandled China’s accession to the WTO and incorrectly assumed the Chinese’s intentions to follow a U.S. led global economic order, it’s not clear what strategic benefits would U.S. policy makers would have derived from a better understanding. China’s development strategy of suppressing household income, tolerating environmental degradation, and playing technological catch up is one it can embark on with or without the consent of countries, like the U.S., at the technological frontier.

There’s no doubt that China’s policies of wage suppression have been responsible for job losses and slow income growth for millions of America’s most vulnerable workers. But American consumers and businesses that source from China have also benefited from cheap Chinese labor, without having to bear the environmental cost of Chinese economic growth. Meanwhile many sectors of the U.S. economy, namely energy and agriculture, have minted fortunes from Chinese economic development.

And the folks who benefit from a rising China are simply more organized and motivated to protect their slice the gains than are those Americans who have suffered from it. Despite the ubiquitous nostalgia in American discourse for a past when low-skilled workers could earn a middle class living in manufacturing, actual low skilled workers are desperate to get out of the manufacturing sector, even in industries that are protected from foreign competition.

President Trump now realizes that there is a much larger constituency for tough talk on trade than real action. And to his chagrin, he will soon learn he is in a much worse position, as a Republican, to demagogue this issue than the Democrats will be this fall, and as they prepare to field a challenger to the president in 2020. The Senate Democrats platform on trade, for instances, proposes a raft of new rules and regulations that would penalize companies which invest overseas, block Chinese investment in American companies, and establish an “independent trade prosecutor” whose sole job would be to fight unfair trade practices in international fora.

While President Trump has mostly succeeded in transforming the Republican Party in his image, he has had no success in bringing the GOP Congress around to his views on protectionism. His failure to convince the Republican Party to take significant action on trade, coupled with his unwillingness to enact countermeasures which he has the power to unilaterally, will leave him wide open to accusations of fecklessness towards the Chinese and other bad actors.

But even if Democrats again take control of Washington over the next two election cycles, the chances of a real trade showdown remain slim. For one, there are simply more popular measures the Democrats will prioritize, like raising the minimum wage, that will satisfy their base’s desire for action to help working people, but won’t result in an internecine trade war. Furthermore, the president’s trade negotiations have brought into sharp relief the limited capacity of any administration to advance more than one major foreign policy initiative at a given time. Past Democratic presidents have decided to give in on trade to free up political capital to deal with issues that are obviously more pressing, like nuclear proliferation or the fight against terrorism. Expect the same from a President Sanders or Warren, when push comes to shove.

President Trump’s failed trade war could be the best thing to come out of the administration, when all is said and done. While the president has exaggerated the extent to which America is harmed by unfair trade practices abroad, he brought a point of view to the debate over trade policy that was sorely lacking, and his unorthodox approach to trade negotiations have revealed important limitations of American power that all future presidents will benefit from understanding. And unfairly or not, it could also be his biggest the biggest policy-related embarrassment of his administration, and one that highlights the GOP’s love affair with big business just when Republicans would like to obscure it most.

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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