The Biggest Loser of the U.S./China Trade War Is the U.S.

It has been said before, but it is worth saying again: Nobody wins a trade war, except countries that steer clear of them. Several countries are winning the trade war that the United States launched against China. The problem? None of them are named the United States or China.

May we have the envelope, please? The winners thus far are (drum roll) Vietnam, Taiwan, Bangladesh, and South Korea, according to data released Wednesday by the U.S Census Bureau. As China’s exports to the United States appear to slump, others boom. Jobs may be leaving China, but they aren’t returning to the Midwest; they are moving elsewhere in the Far East.

The trend is not a new one. It has been very much present since the Administration chose to get involved in a trade guerilla war it couldn’t hope to win. One instance may be a blip, and two a coincidence. Three is definitely a trend. The shift of U.S imports from China to elsewhere in Asia has been growing since May. It is time to recognize it is a clear trend.

U.S imports of goods from China did decline 12 percent after May - only to be replaced by imports from Vietnam (up 36 percent), Taiwan (up 23 percent), Bangladesh (14 percent), and South Korea (12 percent).

President Trump has confidently predicted that diminished imports by the United States will drive China to its knees. But instead, the Middle Kingdom may simply have found a number of middlemen countries. To what extent is production genuinely shifting from China to elsewhere - and to what degree are bystander countries simply re-routing goods that are made in China by the simple expedient of replacing tags that say “Made-in-China” with tags that say “Made-in-Vietnam” or “Made-in-Taiwan?”

We don’t know for sure. By we do know that shifting production from one country to another is a time-consuming and expensive proposition. Shifting production to another country also requires that it contains the infrastructure and telecommunications capacity to support it. It would hardly be surprising if corporate C-Suite executives found a way to cut the time, cost and inefficiency. Indeed, it would be a lot more surprising if they didn’t.

But America’s Asian friends are not the only ones to benefit from the foolish trade war with China. Canada posted an overall trade surplus of almost a billion dollars last month, despite economists’ predictions of a $1.7 billion trade deficit. Driving Canada’s export growth? A 3.7 percent increase in its trade surplus with its biggest trade partner, the United States. It seems like businesses may not like the uncertainty of a trade war, finding them neither “good” nor “easy to win.” That rush of wind you feel is actually a polite “Thank you, eh” from your northern neighbor.

Perhaps the clearest thing about the trade war is that it demonstrates the weakness of nationalism in the midst of globalization. A good example is Apple. Apple is deeply worried about the impact of the trade war on its own bottom-line - a fact it has constantly reiterated. That should translate into angst by all Americans whose jobs and income depend on Apple’s continued success. But the Cupertino company is not letting its worries stand in the way of efficiency.

Apple apparently plans to shift production of the latest version of the Mac Pro from the United States to China - a 180-degree turn from its announced intent just six years ago, when the company boasted of its intent to keep Mac Pro production stateside. Apple will work with a Chinese company out of a factory just outside of Shanghai - a facility close to other Apple suppliers, which could help the company pare its shipping costs as well as its manufacturing costs.

Apple is making the decision even as the trade war with China seems to widen. In other words, tariffs are clearly costly to Apple - but not necessarily as costly as foregoing the benefits of globalization.

No one can win a trade war. But someone can lose. Right now, the biggest long-term loser in the U.S-China trade war is none other than the United States. Vietnam, Taiwan, Bangladesh and South Korea send their thanks.