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Trump’s Trade War with China Will Cause an Economic Catastrophe — Here’s a Better Solution

July 18, 2018 in Blogs

By Marshall Auerback, Independent Media Institute

There’s a better solution than tariffs and trade wars.

With the announcement by President Trump that the U.S. would start the process of imposing 10 percent tariffs on an additional $200 billion of Chinese imports in the next few months, it is safe to say that the U.S.-China trade war has definitively moved past the phony war phase. This action goes well beyond placating some important rust belt/swing-state constituencies and reflects the president’s deeply held belief that trade is a zero-sum game in which the U.S. has been persistently played for patsies over the last several decades, especially by Beijing (although, as last month’s G7 summit demonstrated, neither the EU, nor Canada, is exempt from this animus either). The cumulative actions undertaken by the president now account for almost 7 percent of total global trade, according to the economist George Magnus, reflecting the magnitude of Trump’s efforts.

If Trump is actually hoping that tariffs will enhance the possibility of boosting America’s export markets, he’s in for disappointment and a good deal of anger from the very economic sectors he might have expected to champion him. Modern global supply networks have been established on the assumption that globalized free trade and capital mobility were permanent realities. The so-called “Washington Consensus” has assumed globalization as an irreversible process to such a degree that U.S. companies are utterly reliant on global supply chains.

So what is the solution? Perhaps that might come via the imposition of local content requirements as opposed to a haphazard reliance on tariffs, which is to say that when a foreign company manufactures a product in a country, a certain proportion of those materials and parts should be made in that country domestically rather than imported. This is not unusual. In fact, China makes use of this practice very liberally, and insists that a minimum level of local content is required, when giving foreign companies the right to manufacture in a particular place. And if this requirement is mandated going forward, it may well arrest the ongoing “de-skilling” of the American labor force (because …read more


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