Presidents Trump and Xi’s decision to resume trade talks at the G20 Summit is a step in the right direction. But the “hold” on List 4 tariffs is temporary, as far as we know, and it keeps businesses guessing in a world of uncertainty. Today, the tech industry loses $1 billion per month to tariffs on Chinese imports. We must continue to push for a trade deal that removes all tariffs.
By almost every measure, China and the U.S. need each other. We need their rare earth minerals, their investments in our government debt, and their huge purchases of our farm products. As China buys agricultural commodities elsewhere, cuts rare earth mineral production, puts huge tariffs on our products, discourages visits to the U.S., and murmurs about selling U.S. debt, we are seeing real American pain.
But the Chinese are hurting as well. China’s sales to the U.S. have dropped. Manufacturers and foreign investors are looking to Vietnam, Indonesia, and Malaysia to build and grow. The Chinese economy is slowing.
Both countries are suffering. Here are three reasons we must salvage our relationship with China and negotiate a settlement that removes all tariffs:
1. It will affect the world. In the past month, I’ve visited countries in both Asia and Europe, and business and government leaders on both continents are concerned the U.S.-China trade war will drag the world into another recession.
2. No one wins a trade war. I know of only one American economist who thinks tariffs are an effective tool and a trade war can be won. Sadly, he is in the White House advising President Trump. As with reaction to the Smoot-Hawley Act — the 1930 congressional mistake that sparked the Great Depression — today’s economists overwhelmingly think a trade war and tariffs are bad ideas.
3. It ignores our investment in China. By almost every measure, the U.S. has helped China become an economic powerhouse. We’ve helped the Chinese government become a first-world country with help from U.S. agencies, including the Center for Disease Control and the Federal Aviation Administration.
We supported China joining the UN Security Council and the World Trade Organization. We gave China Permanent Normal Trade Relationship (PNTR) status, allowing them to sell products to us with zero or low tariffs. We became their major market for exports of low-cost consumer electronics, hardware, housewares, textiles, and clothing. And each year, our colleges and universities take in over 300,000 Chinese students. In short, we have helped tens of millions of Chinese citizens shift from poor to prosperous.
And China has reciprocated. Like Japan a generation ago, China fed Americans’ need for low-cost, high-quality products. Yet while we competed with Japan economically, we kept a warm relationship. Japan shared many American values, while China does not. China has taken American intellectual property. Its government has no respect for privacy and aims by next year to have social ratings of every citizen, affecting their travel, employment, and even dating. The Chinese people have no recourse through voting. China doesn’t allow freedom of speech, freedom to access other views on the internet, or freedom of religion. It has even created re-education camps for religious minorities.
These are big issues, and we need to bear them in mind as we negotiate a deal. But we cannot be foolhardy. Any hasty action could risk the stability of our supply chains and the health of our economy.
In the near term, let’s preserve our relationship — at least until the elections are behind us — to skirt a recession. A reprieve from escalating trade tensions will give U.S. companies more time to consider how to move more of their eggs out of the China basket.
For now, we must find a way to work with China, or we risk plunging both our countries and the world into recession, conflict. and even depression.
Gary Shapiro is the president and chief executive of the Consumer Technology Association (CTA), which represents more than 2,200 consumer technology companies, and the author of Ninja Future: Secrets to Success in the New World of Innovation.