Why trade war with China is a dangerous game for America
Stephen Moore is a friend and a leader in the free market movement. He understands trade policy. “I am a free trader and I hate tariffs,” he declares in the first sentence of a recent opinion piece in The Hill. But he then goes on to endorse the use of tariffs to “negotiate” with China. We respectfully disagree that now is a good time for the United States to erect punitive trade barriers with China in an effort to “hit their vulnerable economy.” His aim is off. The people being hit by these punitive tariffs are Americans.
All trade wars are wars of choice. American tariffs are paid by American consumers. Chinese tariffs are paid by Chinese consumers. Tariffs are hurting our farmers and manufacturers who are seeing markets closed off, supply chains disrupted, and costs inflated by a trade war. China is the third largest export market for the United States. Americans sell more than $170 billion in goods and services in China, and exports had been growing over the past few years. This trade has added to our prosperity.
Americans are enriched by imports even more than by exports. “More exports increase wealth only because they allow Americans to buy more imports and give non-Americans greater incentives to invest” in the United States and to help grow our economy, the Mercatus Center has noted. Trade is not a one way street. Trade is people in China and people in the United States engaging in the voluntary exchange of goods and services to their mutual benefit, whether Americans are importing or exporting. Consumers are helped, not hurt, when companies in other countries choose to sell us goods that we want at an affordable price.
While we certainly have legitimate concerns about abusive Chinese trade practices, including the theft of our intellectual property, these issues should be dealt with through international institutions such as the World Trade Organization, where the United States wins 85 percent of the cases it brings. This work requires a scalpel, but tariffs are a club. They hurt our efforts to address Chinese misbehavior when we impose them on key allies such as Canada, Mexico, Japan, and Europe. We should be creating a united front instead of alienating those with similar challenges.
Moore articulates this crucial point himself when he argues that “what free traders should be doing, if they want to be constructive, is to help the Trump administration” pass the United States Mexico Canada Agreement. But it is the president, not “free traders” and not Congress, who imposed tariffs on steel and aluminum on our closest partners. A prerequisite for approving the United States Mexico Canada Agreement is eliminating those tariffs, a step the Trump administration finally took this month.
This trade brinkmanship is a dangerous game. Some argue it is a risk we should be willing to take because there is light at the end of the tunnel. This is well intentioned yet strategically flawed. The Trump administration indeed deserves tremendous credit for our strong economy today, but this strength is no justification for imposing tariff policies that Americans, not the Chinese, end up paying for. The lessons of history demonstrate that a trade war between the two largest economies on the planet will do no good and plenty of harm. Even White House chief economic adviser Larry Kudlow acknowledged that “both sides will suffer” in a trade war.
Instead of ignoring the lessons of economics and history, we should learn from them. This time will not be different. Protectionist policies make everyone less well off. Trade enriches us. This is why we choose trade.
Grover Norquist is the president of Americans for Tax Reform.
Timothy Phillips is the president of Americans for Prosperity.
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