Position: Trade war is good for the United States
This position addresses the topic China–United States trade war.
For this position
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In the wake of Trump’s move, Beijing is threatening to retaliate with “necessary countermeasures.” But its options are pretty limited. Fact is, the US economy is strong, while China’s is slowing. And the US trade deficit with China, $419 billion last year, means Beijing has more to lose from escalations. You can see why New York’s own Sen. Chuck Schumer is urging the president to “hang tough on China.”
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To enter its market, China for years has required high-tech companies to transfer proprietary technology to local partners, so that US corporate bosses, with their focus on quarterly results rather than long-term viability, promiscuously allowed Chinese firms to filch a storehouse of laboriously acquired Western knowledge that could vault so industrious a people to domination of the highest-value industries in short order.
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Against this position
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With Trump’s trade wars risking permanent damage to the agricultural sector, perhaps it’s time for American farmers to turn up the volume and make sure the president hears their message loud and clear. The same goes for American consumers, since the average household will pay an extra $1000 per year for Chinese goods thanks to Trump’s tariff tantrums, according to JPMorgan.
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China is a vast and expanding market, and the government unfairly leverages access to its consumers by demanding that companies wishing to sell there hand over intellectual property as a ticket to entry. That is wrong, but Trump piles on by complaining about the trade imbalance between the two countries and acting like an old-school mercantilist following the outdated idea that profitable trade balances, encouraged by protectionism, build wealth. Trade wars don't build wealth. Like other kinds of wars, they destroy it.
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Additionally, such shifting of production out of China means a likely loss of market share in China and that exited U.S.-owned factories would be gobbled up at fire-sale prices. And intellectual property or proprietary practices likely would be illegally grabbed by the new owner.
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In an interconnected world, how does a trade war with China help potential negotiations over North Korea and its nuclear threat? China is crucial to any such negotiations. The markets tanked after Trump’s tariff announcement, providing a clear signal to the president. He would be wise to heed the warning about the merits of a trade war.
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Possibly no state is getting hammered harder in this trade war than Illinois. According to the U.S. Chamber of Commerce, $3.8 billion worth of Illinois exports are at risk, including $1.3 billion in soybeans. In retaliation for Trump’s broad tariffs on Chinese goods, China has slapped tariffs on agricultural products in which Illinois is a world leader, including corn, hogs and soybeans. A third of all soybeans grown in Illinois are exported to China.
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On Tuesday, White House economic adviser Larry Kudlow told CNBC that “the economic burden of tariffs is falling almost 100% on China.” As numerous academic studies show, that’s a demonstrable lie. In fact, the tariffs “are essentially being paid by Americans and not by China, so what the president has said about that is completely false,” Robert Kudrle, professor of international trade and investment policy at the University of Minnesota’s Humphrey School, told an editorial writer.
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There is no sign the tariffs are shifting manufacturing from China to the United States. The latest data shows the manufacturing sector is expanding at the slowest pace since 2009. JSW Steel, which said last year that Mr. Trump’s tariffs on steel had made it possible to begin a $1 billion expansion in the United States, is now suing the Trump administration for imposing tariffs on the company’s imports of raw materials.
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No one denies that China has engaged in practices that harm American companies, such as theft of intellectual property and subsidies to state-owned companies. But the president gave up a powerful tool of leverage when he pulled out of the Trans-Pacific Partnership, which would have created a huge free trade entity of 12 nations. China would have felt pressure to seek admission, submitting to rules that would have compelled reform. Instead, Trump has tried to cow a Chinese government that increasingly relies on nationalism and resistance to foreign demands to maintain public support.
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Mr Trump thinks his trade measures are hurting China’s economy and that this will force Mr Xi to bow to the main US demands: greater market access and an end to Chinese piracy of American intellectual property. The White House is right in the first of these assumptions, but not in the second. China’s economy is growing at its slowest rate in almost three decades and US tariffs are certainly one of the reasons for that. But Beijing tends to play things long, which makes its willingness to allow the yuan to rise above seven to the dollar both significant and worrying.
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Small, family-owned business are among the hardest hit, especially those that export to or import goods from China. But the toll is beginning to be felt by giants like Apple and Caterpillar, who've seen their stock values tumble as stiff tariffs on technology and machinery are becoming a reality. But in Texas, a state with more farms and ranches than any other, no one is getting hit as hard as those in the ag industry. In our state and across the country, producers of cotton, soybeans, corn, feed grains and other crops are struggling financially with farm loan bankruptcies and delinquencies spiking recently due in part to poor weather but also the intensifying trade war.
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The negative impacts of this dispute, along with diminished harvests this year, are having an impact on rural America. More than 240 Midwestern farms have already filed for Chapter 12 bankruptcy over the past year, and more are struggling to make loan payments. Farmers are patient — they have to be. But I am sure they do not want to wait another 14 months or more before this dispute is resolved.
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The impact of the president’s escalating trade war with China has been particularly stark for the sector, which saw the value of exports to China plummet by more than half according to the most recently available federal data, from $19.5 billion in 2017 to $9.1 billion last year. This is in a trade that had grown eightfold since 2000. The decline continued through the first half of this year, with agricultural exports to China $1.3 billion off last year’s steeply diminished level.
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China is a powerful country with a long-term view on how to play the West’s game on trade while maintaining its autocratic rule. It is not going to be forced into market reforms, let alone democratic governance, by a U.S. president who has isolated his country on the world stage and has trouble seeing beyond his next tweet.
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Then why did Trump delay a deadline for imposing tariffs on Chinese imports of many electronic devices and some clothes and footwear, from Sept. 1 until Dec. 15? Why did he acknowledge concerns the tariffs could affect the holiday shopping season? Maybe because Trump is paying attention to impartial analysts, not just his trade warrior advisers.
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Mixed on this position
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The first step in fighting this New War is to focus on trade policies that incentivize structural changes in China’s economy and its treatment of foreign companies and investors. The examples of Chinese economic misbehavior are too vast to list here, but the American consumer shouldn’t have to pay for Middle Kingdom misdeeds through tariffs. Instead of a tax on American consumers and businesses, we should have a policy of reciprocity.
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