US tariffs are containment: Beijing’s message, fed by the White House

After a year of skepticism from investors and political allies in the Republican Party, the administration of US President Donald Trump has made it clear that tariffs are a defining component of its policy. Pushed by the president and a group of hawkish policy advisers, the blunt tool has been ostensibly used to protect US steel and aluminum industries, as well as pressure China to change domestic industrial policies.

At the same time, in the case of both goals, Trump has contradicted the stated reasoning for imposing tariffs. Speaking in interviews and at campaign-style rallies, he has consistently focused on the issue of trade deficits, belying the legal basis for tariffs. When speaking of China, echoing political allies and White House officials, he has gone a step further to suggest his goal is to contain China’s economic rise.

In the case of the duties imposed on imported metals, the US president has boasted of their effectiveness in negotiating better trade deals. That contradicts the goals set out in the law, as well as his top trade official’s insistence that they are strictly protectionist measures to help build up domestic manufacturing capacity.

US Trade Representative Robert Lighthizer, who grew up in a decaying steel town, stressed to lawmakers earlier this year that exempting any country would defeat the purpose of the tariffs. Capacity to produce steel domestically is a national-security necessity, not a bargaining chip, the reasoning goes.

The tariffs on China have been imposed under a different law, which gives authority to take unilateral trade action in response to broadly defined, unfair trade practices. The Trump administration’s stated focus has been on the theft of intellectual property. But the president himself has focused on the ballooning bilateral trade deficit, as well as his desire to keep China from becoming a larger economy than the United States, as he indicated at a rally last month.

“When I came [into office] we were heading in a certain direction that was going to allow China to be bigger than us in a very short period of time,” Trump said to a cheering audience in West Virginia. “That’s not going to happen any more,” he reassured them, adding: “I want to be their friend, but we had to do things that we had to do.”

One means to this end, White House trade adviser Peter Navarro said last May, was to keep China from moving up the manufacturing value chain. When asked whether the administration’s trade policy sought to keep China from becoming a leader in high-tech industries, Navarro said in a radio interview: “Exactly.”

The message that the current US trade policy is an effort to thwart China’s rise is parroted by Chinese state media, with commentary at times giving the impression that such a goal is unspoken. This, despite the fact that the US president himself gives voice to its truth.

In the past week, influential Chinese Communist Party publications have spent a great deal of ink writing about the trade war. Huang Shudong, an investor who spent his career until the 2008 financial crisis working at financial institutions in the US before returning to China to write about lessons learned, was clear about the true intentions of the trade war.

The Trump administration’s trade policy is an extension of decades of strategy devised in Washington to contain China’s rise, Huang wrote for a magazine published under the auspices of the influential party journal Qiushi. The shift, in fact, dates as far back as the presidency of George W Bush, but had to be put on hold after the terrorist attacks of September 11, 2001.

The priority of containing China was again put on the back burner during the 2008 financial crisis, but was revived in earnest under president Barack Obama in the form of the Trans-Pacific Partnership and the broader “pivot to Asia.”

In essence, Huang contends, Trump’s trade war was a predictable course of action on the part of a US that undermined Japan’s development in the 1980s and failed to support Russia after the fall of the Soviet Union. The real lessons learned, he says, is that compromise in the trade conflict would mean giving up China’s economic momentum.

An editorial written under Qiushi’s editorial pen name detailed a more comprehensive political theory regarding the Trump administration’s policy. The goal of using the term “state capitalism,” the journal contends, is clear: to defend capitalism and undermine the economic rise of developing countries, especially China. “Socialism with Chinese characteristics” is compatible with a market economy, but in contesting this, the United States hopes to undermine faith in China’s model, the commentary says.

Confusion as to what Trump’s specific goals are in his trade fight with China is widespread, as economists from global investment bank Barclays said this week.

“His overall objectives, in our view, remain uncertain,” they wrote in a report on Tuesday, as quoted by The Street. There is little evidence that the tariffs will significantly reduce the massive trade deficit, and benefits to some industries will likely be offset by the pain felt by others, as well as consumers, who will face higher prices.

One thing appears clear: Explicit statements that the true goal of the trade war is to keep China down are lending credence to the arguments of hardliners in Beijing, a development that does not bode well for compromise.