When President Donald J. Trump confronted China over its predatory trade practices, there was much gnashing of teeth and rending of garments, and a great hue and cry went up across the land.
“You cannot do this,” wailed the moneychangers of Wall Street. “It shall bring recession.”
“Your tariffs are blasphemy,” said the High Priests of the One True Church of Free Trade.
“Woe unto us, desolation shall be visited upon all the land, for you have forsaken the true way of globalism,” muttered those who worshiped in the groves of Davos, their wizards and they who kept familiar spirits.
Leaders of finance, business and academia accused President Trump of starting a trade war with China, oblivious to the fact that China has engaged in economic aggression for decades, destroying the livelihoods, dreams and communities of millions of Americans.
Then a funny thing happened on the way to the trade war.
The gloom-and-doom forecast after the administration slapped tariffs on billions of dollars of Chinese imports failed to materialize.
When President Trump slapped tariffs on yet another tranche of Chinese imports, naysayers again predicted the stock market would crash and drag down the entire economy.
But the Dow continued posting record gains, unemployment fell to a 50-year low, and the economy kept humming along.
The “experts” were at a loss to explain why reality didn’t conform to the theories they were taught in Econ 101. A Wall Street economist told Reuters, “It’s like we have nothing to fear, but we should.”
In the precincts of the Pentagon and lower Manhattan, those who once prescribed free trade with China as the panacea that would bring world peace and global prosperity acknowledged their medicine led to a formidable military, economic and cultural threat rather than a liberal democracy growing in the Middle Kingdom.
Wall Street eminento Jamie Dimon, CEO of J.P. Morgan Chase, initially opposed the president’s tariffs but now “absolutely” supports confronting China over its theft of intellectual property, forced technology transfer and barriers to foreign investment.
“We’re better off dealing with it now, whatever that means for the economy,” Dimon told the globalism uber alles crowd at the Council on Foreign Relations. “I wasn’t in favor of the tariffs,” he said.
Now he’s not in favor of just any deal that doesn’t address structural issues underlying our dysfunctional relationship with China. “We don’t want a soybean deal. If they agree to buy $200 billion in goods from us, that doesn’t fix the problem,” Dimon said.
Across the country and around the world, business leaders are disinvesting from China. “GoPro, the mobile camera maker, and Universal Electronics, which makes sensors and remote controls, are shifting some work to Mexico. Hasbro is moving its toy making to the United States, Mexico, Vietnam and India,” and a manufacturer of heating and cooling equipment moved production back to the U.S. from China, the New York Times reports, seeing these moves as “a big victory” for President Trump.
The European Union stands with President Trump in confronting Beijing. Brussels understands the threat of China’s forced technology transfers, steel overcapacity, cyber espionage and investments targeting critical technology and infrastructure.
The consensus that China would become a free-market economy as it grew more prosperous is now dead.
In the cold hard light of reality, free traders acknowledge the Export-Import Bank is important and necessary in confronting Beijing. Laissez-faire nostrums and fundamentalist libertarian dreams are fine for ivory tower debating clubs but offer little protection on the battlefield against the mercantilist platoons of the People’s Liberation Army.
“You are a financial tool and a national security weapon,” White House chief economic adviser Larry Kudlow told the Ex-Im Bankers. “I want to go head to head with China and others and make sure we can whup them.”
Kudlow is a free trader of the first water, and he is invoking Adam Smith, the father of free trade, in supporting the Export-Import Bank.
Smith’s Wealth of Nations” calls for tariffs “when some particular sort of industry is necessary for the defense of the country” (pages 169, 170 at link). The navy was indispensable for Britain’s national security, and Smith said protection for British shipping and shipbuilding industries was “the wisest of all the commercial regulations of England” because “defense … is of much more importance than opulence” (p. 172).
Today, the United States and China are in a contest for global economic supremacy, and the National Security Strategy of the United States explicitly identifies China’s economic challenge is a threat to our national security as well our opulence. Twenty-first century warfare is about economics.
China is using export subsidies to spread its influence around the world and outmaneuver the U.S. in Latin America, Africa and Asia. Closing down the Export-Import Bank would amount to unilateral disarmament in the face of China’s economic aggression.
President Trump understands that China has been waging a trade war for decades and must be confronted with tariffs and every means necessary.
The elites have finally come around to his way of thinking. But don’t hold your breath waiting for them to give him credit.