In a US-China trade war, these are America's best options
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It’s no secret that Donald TrumpDonald TrumpKobach fined over Trump meeting memo OPINION: Dear media, Americans don't care about Obama's legacy Make America’s classroom and workplaces safe again MORE thinks China is ripping America off. He has labeled Chinese trade practices as abusive and unfair. He holds China responsible for stealing American jobs. Engaging in a trade war with China should be avoided at all costs, but the U.S. has several options to renegotiate and rewrite trade agreements with China to protect American interests, and even promote economic and political stability.

Tariffs

Trump has often threatened to impose tariffs on Chinese products coming into America. The range of possible tariffs has varied from 10 percent to 45 percent.

Many countries have tried to keep and create jobs using various kinds of protectionist policies, such as import tariffs, import quotas and trade embargos. But they have never worked. It’s doubtful that tariffs on Chinese products would bring many American jobs back either.

Ironically, China itself is losing some of its industries and jobs that it gained from America such as textiles, to even lower labor-cost countries, such as India and Vietnam.

China can retaliate, too. It can hurt General Motors and Ford by switching to their competitors like Mercedes-Benz and Volkswagen. Some of the aircraft orders placed with Boeing can be transferred to Airbus.

The Chinese state-owned enterprises have already moved a good amount of their investment banking business from American investment houses to their Chinese counterparts. American agricultural products would also lose Chinese markets.

In 2009, when President Obama levied a tariff on Chinese tires, China retaliated by imposing tariffs on American chicken and automotive products.

In a U.S.–China trade war, some of America’s allies, such as Japan, South Korea and Taiwan, would suffer as well. China imports goods from these countries before processing and exporting them to America.

American workers, whether they voted for Trump or not, would be hurt due to the trade war. In addition, they would continue to lose jobs due to increased productivity resulting from the rapidly growing technology and increasing population.

Trade partners

A better option would be to encourage American importers to buy from countries other than China. It would send a clear message to China that America doesn’t want to depend upon it as its major source of imports anymore. America should also shop around and expand its list of countries it can import. This could include India, Indonesia and the Philippines.

The U.S. must use this switch to create bilateral trade agreements with these countries so that they use their export dollars earned to buy American products. This switch would have many advantages. It would not hurt the net number of American jobs, would create jobs in the new exporting country, and would reduce American dependence on China.

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It would weaken China’s financial inflows, which in turn would clamp down on its military ambitions. Finally, it would not involve imposing any tariffs on China.

If China can retaliate by switching from its American suppliers to those from other countries, why can't the U.S. do the same? What’s stopping America from using its powers as a customer to protect its own interests?

Political strategies

Trump has another tool, but he should be cautioned on using it. He can continue to raises questions and concerns about China’s increasing presence in South China Sea and its unfair treatment of Taiwan.

In those scenarios, China would find it easier to compromise on the trade issues. The danger is that China can retaliate by increasing its presence in South China Sea and by putting more pressure on Taiwan.

Military implications

America has unintentionally been a source of China’s military buildup. The U.S. obviously isn’t arming China with military equipment, but the U.S. is making billions of dollars available to the China by buying Chinese exports. America has a competitor not only in the economic marketplace, but also in the political and military arenas.

It is dangerous for America to help its competitor, a communist country, grow both economically and militarily. The champions of the American doctrine of free trade must recognize that it is seriously harming American interests.

China has been waging a trade war against America since it became a member of the World Trade Organization (WTO). America must uses its options to protect itself.

The U.S.–China economic relationship is heading for a bumpy ride. Starting with the war of words, both economic and political tensions are expected to arise. America should start with using its trump card—its strength as a customer.

The U.S. should gradually replace China as its principal source of imports. This would weaken both China’s economy and military. In doing so, Trump can very well build economic and political peace through using its consumer strength.

Narendra C. Bhandari, Ph.D. is a professor of management at Pace University’s Lubin School of Business.


The views of Contributors are their own and are not the views of The Hill.