OPINION:
Can China win the Trump trade war? The answer is no. First, Chinese economic data has been skewed positively for years, so whatever data we see, we must recognize that things are actually worse than they look.
China works to keep its citizens’ wages artificially low. This ensures reduced domestic consumption and increases national savings (i.e., increases manufacturing capacity). If the U.S. completely decoupled its trade with China, Chinese consumption would not be able to absorb the leftover capacity that would not be exported. This would result in a downward deflationary spiral in China that would put a significant amount of domestic pressure on the Chinese Communist Party.
In addition, the regular Chinese strategy of dumping cheap products into foreign markets will be difficult because these other countries have taken their own steps to lessen the impact of decades of Chinese overproduction. These nations will be on alert, as they are aware that excess exports dumped on their markets will hurt their own manufacturers.
In the first Trump administration, China circumvented tariffs by moving goods through Vietnam, Mexico and Canada (among other countries). President Trump has closed this loophole by instituting tariffs on these secondary exporters.
China is in a real bind with the new trading regime. It must now either capitulate or find trading partners willing to accept both Chinese economic dominance and a potential trade war with the U.S. I posit that most nations will stick with the U.S. over China.
The time of Chinese dumping and economic bullying is nearing its end thanks to bold action from President Trump.
CHARLES DIXON
Fairfax Station, Virginia
Please read our comment policy before commenting.