EYESHENZHEN  /   Opinion

Donald Trump’s trade war is a desperate measure in defense of a failed leadership class

Writer: Kyle Echols  | Editor: Jane Chen  | From:  | Updated: 2019-06-17

As an American living in Shenzhen for 11 years, I have benefited greatly from Chinese hospitality. I have a Chinese wife, a Chinese family, and many Chinese friends who admire American culture as much as I admire theirs. So it has shocked us all to see President Donald Trump turn aggressively against China, raising tariffs on Chinese goods, attacking Chinese companies, and sending warships into Chinese waters. Justifiably alarmed, my Chinese friends have asked me to share my assessment of what is happening. In such circumstances, I cannot mince words. America’s leaders, unable to accept responsibility for their own economic failure, and unwilling to compete with China on fair terms in the global marketplace, have decided to stop China’s rise by economic sabotage.

My description of America as an economic failure will come as a surprise to many Chinese people, who associate America with Hollywood images of a prosperous society producing successful brands like Apple, Nike, Ford and Boeing. But America’s global companies contribute little to the prosperity of most Americans. They have moved most of their production overseas. The middle-class jobs are largely gone, the profits left to the wealthiest stockholders and the elite professionals who serve them. Outside their stately enclaves, vast swaths of America’s heartland resemble Detroit: a constellation of dens of poverty, crime, addiction, underemployment and hopelessness. Trump’s false solutions respond to their rage.

But not only theirs. A segment of America’s corporate class is angry, too. Accustomed to reaping profit by cutting workers, slashing R&D, and using corporate funds to buy back their own stock, America’s corporations are no longer out-innovating and out-competing their rivals. Apple still makes a good phone, but Huawei’s P30 Pro is arguably better. Nike outsells Lining because of its marketing prowess, not quality. Ford, struggling to compete with international rivals, has announced that it will stop producing most passenger cars in the U.S. by 2020. The debacle surrounding Boeing’s fatally flawed 737 MAX contrasts with the auspicious first flights of China’s C919. No wonder many of America’s corporate leaders are quietly pushing Trump to stop China’s economic rise.

Both of Trump’s constituencies, workers and corporate leaders, are making a terrible miscalculation. In a trade war, no one will suffer more than American workers. They will lose access to inexpensive Chinese products, without gaining the promised manufacturing jobs, as U.S. corporations shift their supply chains to Vietnam, Indonesia, and Thailand, rather than Ohio, Indiana and Illinois. Yet American corporations will ultimately lose, too. As Trump disrupts Chinese corporations’ supply chains with threats and sanctions, Chinese companies will face a difficult transition, but within a few years they will learn how to produce needed components domestically. With its vast reserves of talented engineers, willingness to devote a high percentage of GDP to research, and the vision of the Made in China 2025 initiative, China will emerge from this crisis stronger than ever. In response, other nations will seek to integrate themselves more closely with the Chinese economy, through the Belt and Road Initiative and trade agreements, even if the U.S. opposes them.

Unfortunately, this dynamic will be difficult for many Americans to accept. Betrayed by their leaders and increasingly impoverished, resentful and disoriented, Americans are likely to be ever more susceptible to demagogues blaming foreign rivals for their ills. America’s future leaders may well be more dangerous than Trump. China must therefore prepare itself for a protracted diplomatic, economic and strategic conflict with the U.S. to defend the hard-won prosperity of the Chinese people, and to defend the Chinese economic model.

There can be no doubt that it is a model worth defending. As a frequent visitor to other developing countries across Asia and Latin America, I have seen economic policies imposed by Washington through the IMF and the World Bank (such as cuts in education and health care, privatization of basic services, and hasty liberalization of capital markets) cause untold misery. Everywhere these policies are implemented — including in the United States — real wages fall, the cost of living rises, public services fail, unemployment worsens and industry stagnates. In China, in contrast, wages are increasing, the middle class is growing, public services are excellent, unemployment is low and industry advances.

Put simply, this is a conflict between a system that works for the vast majority, and one that doesn’t. Rather than attacking the Chinese economic system, America should be learning from it, and competing honorably. Until the day comes that the United States has decided to develop its own industries and lift up its own people, without interfering with the right of others to do the same, this conflict will not stop. As expats living in China, we can repay the kindness of our Chinese hosts, and also secure a more peaceful and prosperous future for our mother countries, by spreading this message.

(The author is an instructor of Development Economics at Shenzhen University.)