CUMBERLAND — America is engaged in an economic and foreign policy war with China that is unlikely to end before 2021. The latest, very serious setback in trade negotiations, which prompted President Trump to increase tariffs and threaten billions more, is best viewed as the end of the beginning, not the beginning of the end.

In a speech to the Hudson Institute last Oct. 4, Vice President Mike Pence outlined the extent to which the Trump administration is fighting China’s “whole of government” approach to economic and foreign policy. On the economic front, the administration is seeking free, fair and reciprocal trade policy via the lifting of all tariffs, nontariff barriers and state subsidies; by force of Chinese law the cessation of forced technology transfer; and the end of intellectual property theft, through increased scrutiny of Chinese corporate investment and activity in America (primarily by the Committee on Foreign Investment in the United States).

On the foreign policy front, the Trump administration seeks an appropriate balance of military power in the Indo-Pacific, curtailment of “debt trap diplomacy” and enhanced domestic vigilance toward the Chinese foreign policy propaganda machine.

The Trump administration’s two-front offensive goes after China’s very way of life, as it pertains to economic and foreign policy; understandably, China is not going to roll over, especially at the hands of an administration that could be out of power by 2021. China appears to believe it can either outlast President Trump or reach a milquetoast compromise on trade that de-escalates both fronts of the war. According to a recent Bloomberg poll, two-thirds of economists believe a trade deal will be reached by year’s end, implying that consensus expectation is for the latter.

Those banking on the milquetoast scenario are making a critical miscalculation: They believe that President Trump is negotiating past the sale and that the two-front war, as outlined by Pence, is a strong-arm tactic to strike a big trade deal that will help his re-election bid.

For all the “Art of the Deal” negotiating bluster that affords him maximum flexibility on the vast majority of issues, on the issue of trade policy Trump has preached the same sermon, verbatim, for decades. In a Sept. 2, 1987, interview with Larry King, Trump cited the trade deficit, then at $200 billion, as evidence that foreign countries were ripping off America and said, “Those countries should be paying us major billions of dollars (in tariffs) and you won’t have any deficits whatsoever.”

Leading off the 2015 Trump Tower speech announcing his bid for president, Trump said: “When is the last time anyone saw us beating, let’s say, China in a trade deal? … When did we beat Japan at anything? … When was the last time you saw a Chevrolet in Tokyo?” And later in the speech: “We have all the cards, but we don’t know how to use them. … We could turn off that spigot by charging them tax (tariffs) until they behave properly.”

And most recently, in a March 2 speech to the Conservative Political Action Conference, President Trump referenced William McKinley and the Great Tariff Debate of 1888, stating: “Others cannot come into our country and steal our wealth and steal our jobs and build their country.”

To his core President Trump believes foreign countries are ripping off America, and that hiking tariffs will level the playing field and thus boost the American economy. Outside of a material stock market correction, nothing short of China’s fully opening and reforming its economy will convince him to de-escalate. To boot, his anti-establishment base, as represented by Steve Bannon, believes China should be fought tooth and nail.

Trump will not de-escalate until China folds, and, as outlined, China believes it has little incentive to fold to an administration that could soon be out of power. So, while the Trump administration is fond of manufacturing positive trade deal headlines in an attempt to support financial markets, don’t let them fool you: The war with China will continue to rage through the 2020 election.


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