As
America’s exports to China get shut out, our allies and trading partners are
filling the gap. For example, as U.S. soybean exports to China have dropped due
to retaliatory tariffs, Brazilian soybean exports there have surged. Canada,
Mexico, Australia, Japan and others also have benefited. These new trading
relationships are unlikely to be temporary.
Reported in Xinhua, China’s official
news agency, Han Jun, China’s vice-minister
of agriculture and rural affairs, recently said: “Many countries have the
will and ability to replace the U.S. presence in the Chinese agricultural
market. If other countries become reliable suppliers to China, it will be
difficult for the United States to regain the position.”
President Trump’s unpredictable actions may be
textbook negotiating tactics. But they have Chinese customers questioning
whether they can rely on American suppliers, which they increasingly view as
unreliable partners due to the volatility
in the commercial relationship, says the US-China Business Council (USCBC), an
organization of approximately 200 American companies doing business in China.
And the damage is mounting.
While 49% of respondents of a recent USCBC
survey said they lost sales in China due to retaliatory tariffs, 37% said they lost sales
due to their Chinese partners’ concerns about doing business with American
companies, a seven-fold increase over 2018. Even
if the trade war ended tomorrow, Chinese concerns moving forward likely will call for strategies to play it safe by reducing
dependence on U.S. companies.
Trump’s
go-it-alone tariff approach is proving very worrisome at best. And his
statement, “trade wars are good, and easy to win,” couldn’t be further from the
truth.
When faced
with Trump’s tariffs, virtually all America’s allies and trading partners have responded
in kind, often targeting U.S.
agricultural exports. Peter Navarro, Trump’s trade advisor, grossly miscalculated what would
follow when in 2018 he said, “I don’t believe there’s any country in the world
that will retaliate for the simple reason that we are the biggest and most
lucrative market in the world.”
What is a better strategy to deal with the Chinese? Working closely with our European,
Asian, and other friends around the world to establish a united front against
China would likely prove more effective. And for the most part, we have similar
interests with regard to curtailing Chinese bad behavior.
But establishing a united front at this point would be
difficult since Trump has either threatened many of our friends with
protectionist measures or weakened the relationships. Nevertheless, this option
may still be the best way forward.
The administration’s desire to persuade China to stop subsidizing
its state-owned enterprises, enforce intellectual property protection,
eliminate trade restrictions on U.S. firms, and stop demanding U.S. companies hand
over technology in exchange for Chinese market access are important goals. But
implementing the wrong strategy is severely hurting those it is intended to
help.
American farmers and exporters have spent decades developing
the Chinese market. Losing those markets is costly and difficult to bear. But trying
to win them back may be extremely challenging, if not impossible at least in
the foreseeable future. It’s time for the administration to take a different
approach.
*John
Manzella, founder of the ManzellaReport.com, is a speaker, author and
nationally syndicated columnist on global business and economic trends. Contact him at JohnManzella.com.
I am sure all the European and Asian countries you speak about would just line nice and perfectly to for this supposed "united" front. If it was as easy as that why has no one done is successfully for 50 years? These are the kind of articles that really misinform people. Try harder next time.
ReplyDeleteOur European and Asian friends have greater incentives to establish a "united" front against China today than they did years ago. They face many of the same problems with China, which they claim are becoming more severe. The Trans-Pacific Partnership likely would have helped the U.S. achieve greater cooperation from our Asian friends, had the United States not pulled out. What is your suggestion?
ReplyDeleteI can't speak for Manzella but I will add a few words for myself. Beyond "incentives" what have our European friends actually done to resist China? What have they done within the scope of the TPP or anything else? As the below comment mentions, the larger truth is that no one knows how to deal with China. The US has been more obvious but it is not clear we are gaining any objectives.
DeleteThis from Fareed Zakaria’s Global Brifeing this morning.
ReplyDelete“China Is Beating Trump at the Tariff Game”
In arguing that President Trump’s trade war is unwinnable, Weijian Shan writes in Foreign Affairs that China has played the tit-for-tat game of tariffs more cunningly, placing tariffs only on US goods that can be easily substituted, while exempting or even lowering tariffs on US goods that can’t be. “Beijing’s nimble calculations are well illustrated by the example of lobsters,” Shan writes. “China imposed a 25 percent tariff on US lobsters in July 2018, precipitating a 70 percent drop in US lobster exports. At the same time, Beijing cut tariffs on Canadian lobsters by three percent, and as a result, Canadian lobster exports to China doubled. Chinese consumers now pay less for lobsters imported from essentially the same waters."
More of the same doesn't achieve U.S. goals. It may be time for another approach https://www.nytimes.com/2019/10/07/opinion/trump-trade.html
ReplyDeleteTrue. But one that works! That's the trick. So far, no approach seems to work.
Delete“By withdrawing from the Trans-Pacific Partnership, he reduced U.S. trade leverage with China. By imposing steel and aluminum tariffs on allies, he made it harder to form a coalition of trading partners to confront China as a united front.” Should we ask the WSJ editorial board to try harder? Read today’s Wall Street Journal editorial at https://www.wsj.com/articles/the-china-trade-truce-11571003495
ReplyDeleteGood point but given past experience how much could the US expect to gain from China by working with TPP partners and other coalition partners? Maybe not much if the past is a guide?
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