By George N. Tzogopoulos
Donald Trump won the U.S. presidential election of November 8 with a rather revolutionary rhetorical agenda, with reconsideration of trade policies seemingly a major priority.
While facts are normally different from easy campaign promises and words, the appointment of specific figures in the new administration offers a first taste of what might happen from January 20 onwards. In particular, the new Commerce Secretary Wilbur Ross and the head of newly-established White House National Trade Council, Peter Navarro, are widely considered as indications of Trump’s planned hawkish approach.
Naturally, China – as an economic colossus – becomes the first target, although other countries such as South Korea and Mexico may come under scrutiny.
Ross and Navarro were Trump advisers during the election campaign and the inspiring figures of his anti-globalization public remarks. In July 2016, they co-authored a CNBC article identifying alleged flaws in existing trade agreements and portraying Trump as the man to fix things.
They have criticized China’s admission to the WTO in 2001, portraying aftermath as “American companies go bankrupt, China takes over the market, and the court ruling becomes moot.”
As a successful and experienced investor, Ross is believed to have made money after George W. Bush introduced tariffs on Chinese steel imports in 2002. The New York Post has reported that, a few weeks before, Ross had bought steel maker LTV Corp. which largely benefited and was later sold at a very favorable price.
Similarly, The New York Times refers to the new Commerce Secretary’s business interests such as establishing a consortium with Chinese companies, and rather ironically comments that “for all the anti-China commentary, Mr. Ross has been a frequent visitor in the past two decades and has made inroads in its energy industry.”
Navarro is more a theorist than a practitioner. With a PhD in economics from Harvard University he has been business professor at the University of California-Irvine for more than 20 years and was recently awarded the Distinguished Faculty Award for Teaching.
He has a record of anti-China publications including the 2012 documentary film “Death by China,” the principal message of which was to encourage viewers not to buy “Made in China” products. Three years later, Navarro also touched upon geopolitics in a new book on “China’s militarism” analyzing the scenario of a conflict between the two countries.
The appointment of Ross, and even more so Navarro, has led numerous media organization to explore whether a trade war with China will break out under the Trump administration.
Forbes magazine, for instance, published an article entitled: “Assessing risk of possible U.S.-China trade war.” The BBC also took the trade rivalry for granted, declaring: “U.S. vs China: Trump tools up.” However, although the idea of a “trade war” can certainly sell, other American media have remained calm and careful.
Fortune, for example, made a comprehensive analysis explaining why “America would lose a trade war with China.” Moreover, the CNN website found eight reasons why a trade war with China would be a “bad idea” and The New York Times predicted Trump “couldn’t win” this fight.
China’s reaction in the case of aggressive U.S. policies – such as heavy tariffs or sanctions as touted by Ross and Navarro – will be immediate and equally strict. An example would be the Chinese preference of the European aircraft industry over American rivals.
Nevertheless, the objective must surely be to prevent a trade war and not to count the impact of consequences, as this situation will be a definite “lose-lose” one.
The new trade team of Trump, which also includes billionaire Carl Icahn as an adviser on regulation issues, will soon need to decide whether, and to what extent, it will proceed with the implementation of the relevant pre-election program.
With reference to China, the risk goes beyond economics. Sino-American relations are and will critical to world geopolitical stability. Thus, every single barrier could perhaps alter or lead to a change of the existing balance of power.
It’s not yet clear if Trump is prepared to challenge the Beijing administration at all levels. Some say his current words are only an attempt to improve his bargaining position before inauguration.
From another perspective, increased U.S. protectionism and a practical opposition to free trade zones, might also harm the world economy, influencing the prospects for stable recovery due to an expected fall in demand and investment. Subsequently, the Trump team could see American companies seeking to follow their own way no matter what the president says.
Last but not least, the ethical dimension should not be ignored. An ordinary citizen will naturally wonder why many businessmen – now holding key government positions in the U.S. – advocate a different model for their country from that of the companies they have served and significantly helped to grow in the past. It’s worth thinking about.