The Chinese Trade War: What's At Stake?

  • Noah Peterson
  • Nov 15, 2016 6:08PM

Do you remember the story about your dad diligently working away to assemble iPhones in order to put food on the table? Neither do I.

If you're American, Canadian, European, or belong to any first-world western country, you nor anyone else you've ever known has worked in a cheap sweatshop, assembling electronics for a shockingly low wage. Our corporate masters have sent those jobs to China, South Korea, Brazil, and others since day one – and why not? There is currently no downside to doing business in these nations, as companies enjoy the low overhead costs associated with manufacturing in a developing nation. These companies can then import products and distribute them globally, selling them at premium prices. Win-win, right? Wrong.

In a recent article published by the Global Times, a Chinese state-owned newspaper, China threatens to punch back. Without mincing words, the article states that if Donald Trump imposes a 45% tariff on any Chinese-imported products, China will hurt American businesses by simply not allowing those products to be sold in their nation.

“US auto and iPhone sales in China will suffer a setback.”

“A batch of Boeing orders will be replaced by Airbus.”

“US soybean and maize imports will be halted.”

With a market of 1.4 billion people and the iron grip the Chinese government maintains on their economy, it is certainly a scary prospect to consider. The Chinese state can simply make a decision – one which would prevent the sale of products owned by American businesses in their nation, closing the doors of the Chinese market. Companies like Apple, General Motors, Ford, Boeing, and even U.S. agriculture would suffer losses in the billions.

According to the article, this wouldn’t be the first time China has taken punitive measures against the United States for unfavorable trading terms. President Obama attempted to impose tariffs on other products when he first took office- and was promptly swatted like a fly for doing so.

“Not long after Barack Obama took office, US trade and commerce authorities announced a 35 percent import tariff on Chinese tires. In response, China took retaliatory steps of imposing tariffs on US chicken and automotive products. Both China and the US suffered losses as a result. From then on, the Obama administration waged no trade war against China. If Trump imposes a 45 percent tariff on Chinese imports, China-US trade will be paralyzed.”

China has called America out in quick fashion! Whether Trump actually intends to impose high tariffs on the country (and whether or not China will live up to their threats) remains to be seen.

If you've been listening to Donald Trump's rants over the course of the last 18 months, then you've heard him (and probably Alec Baldwin) mention China more than a couple of times. It was a staple of his campaign.

Trump’s war against China started to ramp up during the Republican National Primary Debates, where he made a number of claims about the country, including a purported $505 billion dollar trade deficit with the United States, as well as allegations of currency manipulation.

At an Indiana rally during his candidacy, Trump also stated: “We can't continue to allow China to rape our country, and that's what they're doing. It's the greatest theft in the history of the world.”

Those are fighting words Donald- it's no wonder we've managed to piss off one of the fastest growing nations on the planet.

For the last couple of decades, we've enjoyed nearly free trade with China, and both sides have benefited. China has been able to put their enormous population to work (turning them into an economic superpower), and the United States has been able to get products manufactured for pennies on the dollar. This mutually beneficial relationship has increased the standard of living in China in a massive way, creating a burgeoning Chinese middle-class that American-owned companies have been able to market to (and profit from) greatly.

This puts us in a very strange position. The current Sino-US relationship relies on the Chinese being able to produce goods, export them to the United States, and continue to prosper without regulation. Meanwhile, the only benefit on the American side goes to large companies, which can produce a smartphone for a few dollars and sell it for $800 in the west. Many in the U.S. feel that these profits have not trickled down to the common worker- leaving a huge gap in the American middle-class as manufacturing jobs continue to move overseas.

It seems that American trade is stuck between a rock and a hard place.

Do we isolate ourselves, crush globalism, and attempt to “Make America Great Again,” or continue with business as usual? Perhaps a reasonable alternative can be agreed upon – one which would allow China to continue their growth while guaranteeing that American workers won't be left jobless. Personally, I don't believe that China is going to be willing to sacrifice any of their gains for the purpose of American manufacturing jobs. Trump will have to tread lightly, or else risk angering an economic power that is growing by the minute.