Should Bill Clinton choose to make a run in 2024, he would be the youngest, most experienced, candidate on the ballot, and would probably win in a landslide, although it might not match his 65 per cent approval rating when he left office. (I know: no third terms, but the thought was too delicious to abandon.)
Clinton, China And The WTO
Clinton won plaudits from establishment elites for piloting China into the World Trade Organization, where the communist nation would become a rules-obeying, more democratic member of the international community. It was not to be. Instead, China ignored WTO rules and used its membership to hollow out portions of America’s manufacturing sector, and its new-found riches to finance a system regressive at home and aggressive abroad.
Enter Trump, Followed By Biden
Donald Trump emerged to forge a response, eventuating in close to a bipartisan trade policy based on tariffs, revamping of supply chains, and subsidies for U.S. manufacturers. When Biden took office, he left in place most of Trump’s tariffs, including those that raised the average duty rate paid by Chinese firms from 3 per cent in 2018 to 21 per cent by 2019.
The New Protectionism
Trump now talks of raising the current 2 per cent average of all existing tariffs to 10 per cent, and imposing a rate of 60 per cent on Chinese products. Biden won’t go that far. But he is driven by a perceived need to protect the “middle class that built America”, or at least the 6 per cent of private-sector workers that have joined trade unions. And recognizes that there are national-security reasons for reducing dependence on China, which is in the process of creating a New World Order to rival America for global leadership. He wants to “de-risk” from dependence on China for goods relating to national security by
· subsidizing home-town manufacturers,
· encouraging exporters to “friend-shore”, shift supply sources from China to American allies,
· making it difficult for Silicon Valley venture capitalists to invest in China.
Either candidate would ask the EU to join America in retaliating should China seek to solve its economic problems – too much debt, too few jobs, deflation, centralized direction of the economy – by dumping cut-price goods.
The Chinese And Musk Come To Mexico
In addition to China, facing off against an America that has adopted managed trade are Russia, Iran, scores of Belt & Road countries dependent on China, and assorted fellow travelers such as Brazil. Members of this emerging trade bloc seek to liberate themselves from subservience to King Dollar and thereby diminish American power to impose sanctions and serve as the centerpiece of a democratic, rules-based order. They do not share America’s aversion to goods made using Uyghur slave labor in Xinjiang.
A Trump-Created Path Through Tariff Walls
It is now more than five years since then-President Trump wrote, “I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege….” Shortly thereafter he negotiated the United States Mexico Canada Agreement (USMCA) to replace the North American Free Trade Agreement (NAFTA) which, unfortunately for Tariff Man, opened a backdoor to America large enough to drive truckloads of Chinese products across the Mexico-US border.
China ships products to Mexico where they are “finalized” and shipped to America, duty free pursuant to USMCA. Between 2022 and 2023, for the first time in more than twenty years, Mexico displaced China as the leading source of American inports. The value of goods imported by the U.S. from Mexico increased by 5 per cent, to $475 billion, while the recorded value of imports from China plunged 20 per cent to $427 billion as the value of products made in China ended up in Mexico’s column.
In addition, Chinese manufacturers are setting up shop in Mexico. Three heavily subsidized Chinese auto companies plan to offer Americans an electric SUV containing made-in-China parts and reportedly superior in performance to vehicles made-in-the-USA for $14,000, duty free. The administration is investigating whether these vehicles might be “connected” to Beijing, “like smartphones on wheels”, collecting information on U.S. citizens and infrastructure.
And Elon Musk will begin construction this week of a plant in Santa Catarina, Mexico, about 150 miles from the U.S. border as the truck drives, with the help of $153 million in local government incentives. It will turn out Tesla’s next-generation, lower-cost vehicles and the Cybertruck, using parts made by Chinese manufacturers he has invited to locate nearby to replicate the supply chain at Tesla’s Shanghai plant.
The Biden administration is considering better ways than it has already deployed to end China’s use of America’s trading partners as platforms from which to launch its goods into U.S. markets. But most observers believe it will merely play Whac-A-Mole as China continually changes the original destinations of goods headed eventually for America.
A Policymaker’s Life Is Not An Easy One
Some sympathy is due policymakers. Slamming the backdoor would reduce incomes in Mexico, increasing pressure for illegal immigration. Raising tariffs on China now would forfeit a threat that might worry Xi when he contemplates the future of Taiwan. Increasing tariffs would put upward pressure on consumer prices that are already so high that American voters are more than a little annoyed. Keeping foreign products out would reduce the competition Biden’s antitrust policy allegedly aims to increase.
When it comes to trade, protection has costs, in the thousands of dollars for every American family. They may be worth bearing, but they can’t be wished away. As Frank Sinatra of all people once put it when warbling about love and marriage, you can’t have one without the other.