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The Art of Trade War: Is Trump Winning His Trade War against China?

Photograph Source: PAS China – Public Domain

President Trump is a villain, almost cartoonish in his malignance. He’s a heel. He might as well be tying kidnapped maidens to train tracks and twirling his wispy mustache. He’s the antagonist whose death later in the movie you hope will be epic, horrifically brutal, and deeply satisfying.

And, so, we carry over our emotional responses to this Oval Office carbuncle into our politics. We root against Trump because we want to see him burn. We expect his policies to be failures because they’re concocted by oily ghouls in expensive suits who often have little understanding of anything beyond their own enrichment.

And yet, as political observers, we must also confront the unsettling truth that sometimes Trump’s tactics can be successful. Indeed, in some ways he has rewritten what success can look like for a US president.

Rather than being measured in stability and capable stewardship of the US Empire in service to the ruling class, Trump has used confrontation and destabilization on the global stage to enrich those sectors of capital that rely on him for survival – Big Oil being the prime example – while charting a path toward the prize he lusts after above all others: recognition as a legitimate and successful president.

And this confrontational, and perhaps somewhat successful, approach is best exemplified by his trade war with China.

“I Beat China All the Time”

When Midtown Mussolini made his now infamous campaign announcement speech in Trump Tower in June 2015, very few observers paid much attention to it beyond the shockingly racist rhetoric and tone of what most assumed was yet another publicity stunt. But for those who paid attention there was much to glean from those comments. In that speech, Trump established what has become one of the guiding principles of his presidency: aggressive confrontation.

As if presaging his entire campaign, Trump obnoxiously bellowed the following:

“Our country is in serious trouble. We don’t have victories anymore. We used to have victories, but we don’t have them. When was the last time anybody saw us beating, let’s say, China in a trade deal? They kill us. I beat China all the time. All the time.”

If we ignore Agent Orange’s inane chest-thumping and focus solely on the substance of the off-the-cuff statement, it’s actually quite revealing. He smartly tied ordinary Americans’ economic anxieties around offshoring of manufacturing jobs, and free trade policies generally, to the weakness (read: lack of masculinity) of Obama and prior administrations. But perhaps even more important, Trump positioned himself as the only one with the balls (yes, it’s a man thing) to fight China on an economic footing. And by doing so he was going against decades of mainstream economic orthodoxy around free trade and global markets.

And Trump was derided for these statements. Renowned economists such as Paul Krugman and Joseph Stiglitz called a trade war with China potentially disastrous, citing likely net losses for jobs and growth.

But perhaps what they were missing is that Trump, and his trade guru Peter Navarro, were never primarily concerned with the smaller-scale battles in a trade war of attrition: marginal job losses, negative impacts to certain companies in tech and other sectors reliant on global supply chains, etc. Rather, they intended to win the long game. This posture gained Trump a base of fervent support in the Rust Belt that would ultimately prove crucial to his success in the electoral college.

And here we are in June of 2019. Trump has been waging this trade war for more than two years over the strident objections of most economists. And Trump is able to show some progress, at least from his perspective.

The Numbers Game

Recent data from China’s National Bureau of Statistics shows a significant contraction in manufacturing activity due in large part to Trump’s trade war. As Jian Chang, chief China economist at Barclays Asia Pacific explained:

“Obviously, the investor concern is now shifting from the sustainability of Chinese growth recovery to how fast the economy is slowing… [the trade war] clearly played a role in driving down China’s orders and demand and also consumer and business sentiment.”

While there are no indicators that China’s economy is in freefall, a larger than expected contraction in manufacturing from large private and state-owned firms alike demonstrates that the impacts of Trump’s tariffs, and perhaps also fears of future intensification of the policy, are having a negative effect.

Some might argue that the trade war is equally impacting the US, and that Trump will pay a political price for doing so. And, indeed, that seems to make sense on its face. Recent figures released by the US Department of Labor show signs that the US economy is also taking a hit with payroll increases missing forecast targets and wages remaining stagnant despite historically low unemployment figures, including real unemployment which stands at 7.1% (lowest since December 2000).

But the trade war with China is not about these minor skirmishes, it’s a siege. Trump thinks he can outlast the Chinese, force them to blink, and translate that into political currency. He might not be wrong.

As US companies begin to feel the true impacts of the tariffs, their response could be a bad sign for Beijing. In May, a NY Times op-ed cited Kelly A. Kramer, chief financial officer for telecom equipment giant Cisco, as telling investors that the company had “greatly, greatly reduced” its exposure to China.

Similarly, the President and CEO of a large electronics supplier for outdoor equipment indicated that the increase to 25% tariffs has forced him to look at Singapore, Taiwan, and South Korea for potential replacement suppliers. “I was thinking this is a short-term issue that will go away…[but] I don’t think you can rationally think that any more [sic],” he explained.

Trump may be correctly relying on the fact that the US economy can withstand whatever pain China can dish out longer than China’s economy can withstand Trump’s policies.

Call it the Deer Hunter approach to global economic hegemony.

Multi-Polar Melt

If you’re a denizen of the Kremlin’s media echo chamber, then no doubt you’ve encountered the analysis that goes something like: “Trump’s belligerent trade policies will push China and Russia closer together as the dollar loses its place as the hegemonic global currency thus ushering in a new, multi-polar world.” But, of course, they’ve been saying that for more than ten years now, and every indication is that the world is no closer to such a reality today, and in fact may be further away from it.

For while Russia and China have repeatedly made massive agreements on energy trade, among others, there still is no formal alliance or anything remotely close to what could be called economic interdependence. And the much-trumpeted Belt and Road Initiative is grand in scale but has seen as much failure as success.

A recent study by RWR Advisory group found that about 270 of the 1,814 BRI projects since 2013 are considered “troubled” – roughly 15% of the total projects, accounting for 32% of the total value of all projects. China continues to face opposition even in friendly countries like Malaysia where it is accused of entrapping whole nations in debt bondage.

Similarly, the last few years have seen the obliteration of the previously alluring fiction of BRICS becoming some sort of counterweight to the US and IMF/World Bank.

Brazil has been thrown into political turmoil since the parliamentary coup against Dilma Rousseff and the Workers’ Party and the rise of a far right government. South Africa has proven to have been included more for its contribution to a nice-sounding acronym than any compelling economic reason. India remains more closely aligned with Washington than with China. And Russia faces serious economic problems which could worsen significantly with a global downturn that depresses energy demand.

And it is against this backdrop that Trump is attacking China economically.

He may be a blithering ignoramus whose knowledge of complex issues is as shallow as his view of women, but he’s no fool. Or, at least the policy hyenas cackling into his ear aren’t.

Trump may yet pay a political price for this strategy if the economy officially heads into recession before the election, something that many economists are predicting. But it would not simply be the US that would face recession, it would be the entire global economy. And that could also prove disastrous for China.

Either way, Trump plans to headline his MAGA Klan rallies with the refrain “I said I’d take on China. I have taken on China. And we’re winning.”

And with that he’ll twirl his wispy handlebar mustache, light the fuse on a perfectly spherical black bomb, and launch it at the Democrats.

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Eric Draitser is an independent political analyst and host of CounterPunch Radio. You can find his exclusive content including articles, podcasts, audio commentaries, poetry and more at patreon.com/ericdraitser. He can be reached at ericdraitser@gmail.com.

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