Donald Trump has hit a nerve. After two years of refusing to confront questions about his citizenship, President Obama finally brought forth a complete birth certificate issued by the state of Hawaii, hoping to end the controversy once and for all. Whether he will succeed in putting what he calls “this silliness” behind him remains to be seen.
While many dismiss The Donald as playing court jester on our political stage for personal promotion, it is clear that he has made waves. He has won a following not only because he is brazen and unapologetically alarmed about the state of the union, but because he has the nerve to sound off about China.
Americans are sick of hearing about Beijing’s great achievements. In this era of confronting our own limitations, we are constantly bombarded with China’s accomplishments. One reason President Obama seems so keen to build high speed railroads destined to carry nobody to nowhere is that China has gotten the jump on us. One excuse for boosting our energy bills with high-cost “green” facilities is that China is beating the pants off us. The sudden urgency over the sorry state of our public schools is because those dratted kids in Shanghai run rings around our youngsters on standardized tests.
Donald Trump is having none of it. The Donald is furious that the Chinese have stolen our jobs and thinks we should steal them right back again. “They think we’re the dumbest SOBs in the world,” says Trump.
His solution is to tax imports from China –which likely means import levies– unless they seriously revalue their currency. They are not playing fair, so why should we?
Sensible economists and policy makers will argue that import fines will boost the cost of living in this country, and that is unquestionably true. Americans have benefited from lower prices on most consumer goods because of cheap Chinese imports – a result of that country’s minimal wages and artificially inexpensive currency.
American companies that have built a business model on cheap Chinese goods would be up in arms. The White House can counter with the long-promised overhaul of corporate taxes, and specifically encourage domestic manufacturing through a combination of faster plant write-offs and higher investment tax credits.
Others will cite China’s pivotal role in buying U.S. government debt. If the Chinese should suddenly back out of the market, our interest rates would unquestionably ratchet higher, if only temporarily, exacerbating our federal budget problems. But the markets would likely perceive any improvement in our future export imbalances as positive, while the possibility of a strengthening dollar (based on increased output) would make our bonds more attractive.
While these issues loom, and international trade agreements also present obstacles, there’s a case to be made that China has far more to lose than we do. Anyone who has been keeping tabs on China recently has to be stunned at the draconian steps Beijing is taking to suppress even the mildest of protests. Activists are disappearing or being arrested at record rates, web sites are being shut down, religious services are suddenly out of bounds, human rights lawyers are being beaten and threatened with the loss of their licenses – the government is clearly anxious.
For all its bluster, China’s leadership looks fragile. Revolutions in the Middle East have brought home how quickly populist uprisings of suppressed people can spread. Any disruption to China’s exports that might result in significant layoffs could be dangerous for the regime. The government is caught trying to stifle rising inflation while encouraging growth at a high enough rate to sop up the continuing exodus of workers from the countryside. It’s a delicate balancing act.
While the need to create jobs would make China resist quicker revaluation of its currency, the Chinese might be bullied into more aggressively building domestic consumption through wage hikes or enhanced social safety nets. They could be prodded to open their markets more fully to U.S.- made goods. This would be a boon to American manufacturers, and would begin to right the imbalance that is the cornerstone of global financial instability.
Donald Trump isn’t likely to become president of the U.S. However, some of his righteous outrage is welcome to Americans who feel we are being outflanked by a country that refuses to play by the rules. Why not get tough with Beijing?
