Supporters of President Donald Trump's trade policies dismiss his tariffs as mere negotiating ploys. Nothing for farmers to worry about--just short-term tactics to extract concessions from uncooperative trade partners.
Anyone tempted to subscribe to this theory should read this column in the Wall Street Journal: https://www.wsj.com/…. It argues that the tariffs the U.S. and China are imposing on each other are "likely cemented in place for years."
In the column, veteran trade reporter Bob Davis concedes that Trump has used tariffs as leverage against some trade partners. "China is different," he writes. "Tariffs aren't simply a negotiating tactic for the U.S., but a way to change economic incentives."
The aim, Davis says, is to counter China's coercion of technology from foreign companies wanting to do business there. The Trump team figures the tariffs will make it more expensive for foreign firms to export from China and thus encourage them "to take their know-how out of the country."
For this to work, companies will have to be convinced the tariffs will remain in place for years. As Davis puts it, "This isn't a short-term strategy."
Davis quotes U.S. Trade Representative Robert Lighthizer, who seems to have emerged triumphant in the intramural administration squabbles. Other officials wanted to use the tariffs to push the Chinese to strike deals to buy more from the U.S. Davis says Trump rejected the Chinese offers, undermining those officials and strengthening Lighthizer.
It is, of course, possible the Chinese will now simply give in and stop extorting technology from foreign investors. Possible but not likely. What Washington is asking for includes, Davis writes, "reducing the role of state-owned firms in China's economy, allowing U.S. firms to get majority stakes in businesses in China and dropping pressure on U.S. tech firms to reveal their secrets. These are the types of changes that China finds most difficult to accept."
Davis should know, having been based in Beijing from 2011 to 2014 in addition to all of his years covering trade from Washington. I have always respected him as a straight-shooting reporter. His column is written without ideological edge.
Vice President Mike Pence's remarkable China speech provides additional reason to believe that the administration is digging in for a long battle with China https://www.whitehouse.gov/…. Rarely short of outright war has a top American official fired such a broadside against another country. This is no longer a dispute that can be resolved by minor concessions on trade.
Would a prolonged period of reciprocal high tariffs between the world's two largest economies hurt their economies much? Davis says economists differ on that. What is clear is that U.S. farmers and ranchers would feel the impact. Their exports are high on the list of those the Chinese have targeted.
Better hope Davis is wrong. If he's right, farmers and ranchers could be priced out of what has been their biggest foreign market for a long time to come.
Urban Lehner can be reached at firstname.lastname@example.org