When the U.S. Damages China's Economy, It Damages Its Own
Not only are trade wars difficult to win, they are impossible not to lose. A good example is how China is getting hit by the current trade war launched by the United States – and how much that has rebounded to hurt Americans.
Last month, China’s exports dropped more than they had in two years. Lest anyone think that is somehow good for the country’s trading partners, they should note that imports had also contracted. Softening Chinese demand is being felt all over the world – most especially including the United States. China’s economic decline has already had effects on the sales of such goods as iPhones and automobiles. Apple has issued a warning to investors largely attributing the company’s recent problems to sluggish sales to China. Jaguar Land Rover announced sweeping job cuts.
When the United States inflicts economic damage on China, American consumers are side-swiped. In reality, countries are not in competition with each other – companies are. Countries are not primarily each others’ competitors; they are their customers and their suppliers, their investors and their investment opportunities, their bankers and their lenders. The impact of an economic slowdown is not just felt by the country that first suffers it, but also by every country they do business with – as importers as well as exporters. China’s economy has grown so much that when it sneezes, the rest of the world catches cold. China’s economy is sneezing right now; the U.S. runs the risk of catching a bad cold.
Largely in response to U.S. tariff increases and threats of further trade actions, China’s exports unexpectedly fell by 4.4 percent since December 2017. But its imports declined even more precipitously, dropping by 7.6 percent. The more a country exports, the more it can afford to import. The U.S trade action against China isn’t hurting a competitor so much as a customer.
While the goal of Washington’s trade war has been to reduce China’s trade surplus with the United States, the actual impact has been the precise opposite. If you’re trying to sell airplanes or automobiles, and China is your biggest potential market, you are not apt to cheer when the Chinese economy falters. Does anyone want to see one of their best customers have less money to spend?
Nations do not trade with each other out of generosity, weakness or self-sacrifice. We buy from other countries because we need something they have to offer, or because they are able to offer it at a lower price. Moreover, we buy from other countries for the same reason we sell to them. That is why trade is not a win-lose game. If the U.S. buys electronics and other goods from China, Chinese consumers are better able to afford to buy iPhones and cars from the United States. The end result? Chinese consumers have better access to iPhones and cars, and American consumers have better access to electronics.
The U.S-China trade war is following the pattern of all previous trade wars – both sides are losing. It makes no difference to American workers and consumers who is losing more. Their goal is to advance, not fall behind where they were. The best way to advance is by recognizing that a healthy customer is a good customer.