By C J Atkins:
A competition between the US-dominated model of global capitalism and a rising power China that is not quite capitalist, but also not quite socialist. With these two systems so intertwined, unlike the US and Soviet economies that stood largely apart from one another, the world is in a situation like none ever seen. “Trade is a zero-sum game.” “There can only be one winner and one loser, and the United States is losing.” That’s the message Donald Trump has been hammering since before he even came into office.
The biggest villain in his nationalist nightmares, beating and cheating the US in the cutthroat game of global economics? China, of course. The narrative used to justify his escalating tariff war goes something like this: The trade deficit is out of control because China plays dirty. It keeps US products out of its domestic market, undervalues its currency in order to sell things cheaper, subsidises its state-owned companies, and steals “our” technology to improve its own products. He promises that higher tariffs, which to put it simply are really just increased taxes on imports, will knock some sense into the Chinese and show them America won’t be bullied. Attempting to rally his flagging political base, he claims to wage his trade battle on behalf of the American worker, vowing never to back down until “Beijing stops cheating our workers and stealing our jobs.”
The same game has been played by managers and bosses forever. They try to get their workers to identify their interests with those of the company and compete with other companies and other workers. We’re all on the same team here, don’t you know? It’s troubling when some, like Teamsters Union leader James Hoffa, Jr., repeat Trump’s message. Speaking on PBS recently, he echoed the rhetoric of the President, saying: “We need tariffs against China…to level the playing field…. They’ve had it one way all this time…. They have really kind of gone wild over there. And we have got to get them back to our senses.” The oversimplified explanation that Trump gives, and which sounds appealing on the surface, is that the country will be making money in the short run from Chinese tariff payments and will have more jobs in the long run when China finally cracks. But the reality is, that just isn’t how capitalism works and it’s not how this trade war is shaking out.
The latest calculations from researchers at UCLA show that the American consumer bore the full brunt of increased import taxes in 2018, amounting to nearly $69 billion, or an average of $213 per person. If you bought a new car or washing machine last year, you probably went well over that average. US companies just passed the cost on to all of us. And the real kicker for those who believed Trump’s trade rhetoric? The UCLA team concluded that “workers in heavily Republican counties were the most negatively affected by the trade war.” The impact has been harshest for farmers in some of those same counties. They have watched helplessly as Chinese markets for their soybeans and other crops evaporated in response to US tariffs, while the costs of their tractors went up. For the average American worker and farmer, the trade war has so far been a bust.
So why is Trump really engaging in this economic brinksmanship with China, and why now? For a long time, China has been the world’s low-wage workshop. As a poorer developing country in the late 1970s, China had little choice but to open itself to foreign investors looking for cheap labour. Its factories kept the shelves stocked at Walmart, and in return, the United States sold China tech-intensive goods like airplanes and computer parts. China benefited from the investment, obviously, but whether it was imports or exports, most of the profits usually flowed toward US companies. Chinese solar panels now dominate the world market for renewables, Huawei phones compete globally with older brands like Apple and Samsung, and Weibo’s 462 million monthly users dwarf Twitter’s 270 million. In the nearly 75 years since the end of World War II, US has had no real competitors in the capitalist world.
Only the Soviet Union presented a challenge, but it has been gone for over a quarter century already. China’s rapid growth and development—especially its ambitious “Made in China 2025” plan and its effort to build an international alternative to US- dominated trade with its “Belt and Road Initiative”—promises to reset everything. As for our domestic troubles, the US-China trade deficit is not the main danger threatening the US economy. Graver problems are a public spending regime that showers billions on the military; underfunded education, health, and social services that are starved by tax cuts for the rich; crumbling infrastructure; the refusal of right-wing politicians and corporations to raise wages; and gender and racial pay gaps that maintain systemic sexism and racism. Of course, that doesn’t mean every Chinese trade practice is beyond question.
The world has become an even more complex place since the end of the Cold War. Now, we have a competition between the US-dominated model of global capitalism and a rising power that is not quite capitalist, but also not quite socialist. With these two systems so intertwined, unlike the US and Soviet economies that stood largely apart from one another, the world is in a situation like none ever seen. It’s obvious that compromise and negotiation are the only way forward. The imposition of more tariffs by either the US or China is not going to lead to a resolution that benefits the mass of the people in either country. Trump wants American workers to shift their anger over lost jobs and shrinking wages to China and the Chinese workers there who get paid even less. He says look abroad, not at home, for the source of your troubles. But it must be remembered that it wasn’t China that closed US plants, it wasn’t China that busted US unions, and it wasn’t China that slashed wages and cut public services. Building reckless tariff walls (or border walls) isn’t the way to protect US workers from the impact of developing countries’ move up the international value chain.
Instead, the United States needs to focus on ways to “green” its economy with investments in renewable energy. We should put public money toward public needs that create good jobs, like infrastructure and mass transit. For workers who are displaced by cheaper imported goods, we have to provide retraining and income assistance—including long-term financial help. We should be requiring companies to pay a living wage to all workers and guarantee them the right to organise into unions by reversing “Right to Work” (for less) laws. We can fund a lot of these things if we slash the bloated military budget and stop engaging in unnecessary wars.