china-us-trade-war

The New Right Is Beating the New Left. Everywhere.

From Australia to Europe, the signs are multiplying that conservative populism is on the rise.

Sometimes political revolutions occur right before our eyes without us quite realizing it. I think that’s what’s been happening over the last few weeks around the world, and the message is clear: The populist “New Right” isn’t going away anytime soon, and the rise of the “New Left” is exaggerated.

Start with Australia, where Prime Minister Scott Morrison won a surprising victory last week. Before the election, polls had almost uniformly indicated that his Liberal-National Coalition would have to step down, but voters were of another mind. With their support of Morrison, an evangelical Christian who has expressed support for President Donald Trump, Australians also showed a relative lack of interest in doing more about climate change. And this result is no fluke of low turnout: Due to compulsory voting, most Australians do turn out for elections.

Or how about the U.K.? The evidence is mounting that the Brexit Party will do very well in this week’s European Parliament elections. Right now that party, which did not exist until recently, is in the lead in national polls with an estimated 34% support. The Tories, the current ruling party, are at only 12%. So the hard Brexit option does not seem to be going away, and the right wing of British politics seems to be moving away from the center.

As for the European Parliament as a whole, by some estimates after this week’s election 35% of the chamber will be filled by anti-establishment parties, albeit of a diverse nature. You have to wonder at what margins the EU will become unworkable or lose legitimacy altogether.

Meanwhile in the U.S., polls show Joe Biden as the presumptive front-runner for the Democratic presidential nomination. He is one of the party’s more conservative candidates, and maybe some primary voters value his electability and familiarity over the more left-wing ideas of Bernie Sanders and Elizabeth Warren. That’s one sign the “hard left” is not in ascendancy in the U.S. Biden’s strategy of running against Trump is another. It’s hard to say how effective that will prove, but it is likely to result in an election about the ideas and policies of Trump, not those of Democratic intellectuals.

Meanwhile, the U.S. economy has remained strong, and Trump’s chances of re-election have been rising in the prediction markets.

One scarcely noticed factor in all of this has been the rising perception of China as a threat to Western interests. The American public is very aware that the U.S. is now in a trade war with China, a conflict that is likely to provoke an increase in nationalism. That is a sentiment that has not historically been very helpful to left-wing movements. China has been one of Trump’s signature causes for years, and he seems to be delighting in having it on center stage.

The Democratic Party is not well-positioned to make China a core issue. Democrats have been criticizing Trump’s tariffs for a while now, and it may be hard for them to adjust their message from “Tariffs Are Bad” to “Tariffs Are Bad But China Tariffs Are OK.” Their lukewarm support for free trade agreements — especially the Trans Pacific Partnership, which could have served as a kind of alternative China trade policy — also complicates matters. The net result is that Republicans will probably be able to use the China issue to their advantage for years to come.

Elsewhere, the world’s largest democracy just wrapped up a lengthy election. The results in India aren’t yet known, but exit polls show that Prime Minister Narendra Modi’s ruling coalition — and his philosophy of Hindu nationalism — will continue to be a major influence.

In all of this ferment, I am myself rooting for a resurgence of centrist cosmopolitanism. But I try to be honest about how my ideas are doing in the world. And in the last few weeks, I’ve seen a lot of evidence that a new political era truly is upon us.

Trump Almost Always Folds

From trade deals to gun control and immigration to military deployments, the president has a consistent pattern: Talk a big game, then back down.

President Trump’s May 8 announcement that he was withdrawing from the Iran nuclear deal should not have come as a surprise. He’d spent years railing against the plan—“the worst deal ever,” he dubbed it—and had promised to rip it up. And yet up to the moment when the president made the final call, there was still some suspense about what he would say.

This was not merely wishful thinking by the deal’s backers, though it was partly that. It was not only that members of Trump’s team, most notably Defense Secretary James Mattis, had voiced support for the deal. It wasn’t even just that Trump relishes taking the press (and even his own advisers) by surprise.

No, the other big reason that no one could be sure was that Trump almost always folds. Faced with a tough decision, the president has consistently blinked, giving in to his opponents. Trump has mocked former Secretary of State John Kerry for his supposedly poor negotiation powers, argued that multiple past international agreements suffered from weak-kneed diplomacy, and criticized British Prime Minister Theresa May, a close U.S. ally, for her conduct of the discussion on the U.K.’s departure from the European Union.

The president talks a good—or at least aggressive—game, but he doesn’t always walk it. The Iran deal is one of the few cases—which also include ditching the Paris climate agreement, leaving the Trans-Pacific Partnership, and moving the U.S. embassy in Israel to Jerusalem—where Trump has stuck to the hard-nosed approach he promised during the campaign. But he twice flinched on Iran, too. In October 2017, his first chance to walk away from the deal, he made threatening noises but kicked the deal over to Congress and didn’t withdraw. He passed up another chance in January.

Foreign leaders were among the first to notice Trump was a pushover. In the first weeks of his presidency, they angled for face-to-face meetings with the new president, realizing that in personal meetings, especially when subjected to flattery, he could be swayed. The efforts paid off: Trump shared sensitive intelligence with the Russian foreign minister and ambassador. He

backed down from threats to brand China a currency manipulator, and said that

a 10-minute lesson from Xi Jinping on Chinese–Korean relations had convinced him Beijing had less sway over Kim Jong Un than he had believed. That same spring, Trump

called the leaders of Mexico and Canada to announce he was going to pull out of nafta. The two men convinced Trump to agree to renegotiation instead, a significant climbdown.

The pattern has persisted ever since, with two prominent examples in the last three days alone. One was a high-stakes meeting at the White House, centered on the FBI’s reported used of an informant on the Trump campaign. Ahead of the meetings, there was speculation that Trump, who had tweeted furiously about the informant, would demand an unusual inquiry into the Justice Department or force Deputy Attorney General Rod Rosenstein out. Instead, the meeting ended with a plan for future meetings, and the Justice Department’s committing to do more or less what it had already committed to doing.

Meanwhile, negotiations with China intended to forestall a trade war, which Trump previously said would be “easy to win,” wrapped up. The U.S. agreed to postpone tariffs on Chinese imports. The Chinese made some vague promises about narrowing the U.S. trade deficit, but as Keith Bradsher writes, “China gave up little in return, spurning the administration’s nudges for a concrete commitment to buy more goods from the United States, and avoiding limits on its efforts to build new high-tech Chinese industries.”

This is a repeated motif on trade deals. Trump makes a splashy announcement, but when it comes to the details, he pulls his punches. China is not the only target of suggested Trump tariffs. In March, he abruptly announced tariffs on imported steel and aluminum, saying foreign products were hurting U.S. producers. But he has postponed tariffs on the European Union after objections from American allies there, and also postponed tariffs on steel from Canada, the single largest exporter of steel to the U.S. in 2017, because of the ongoing nafta negotiations.

How are those nafta talks going, by the way? Though Trump was nearly as negative about nafta as he was about the Iran nuclear agreement, he shied away from immediately withdrawing last spring, and talks have slowly dragged on. After the administration missed a deadline that Speaker Paul Ryan set for congressional approval of a deal, Treasury Secretary Steven Mnuchin said this week that the process could slide into 2019.

He even has some regrets about withdrawing from the TPP. The Wall Street Journal reported in April that the president had told lawmakers that he had “deputized Robert Lighthizer, the U.S. trade representative, and Larry Kudlow, the director of the National Economic Council, to study the possibility of re-entering the TPP if the terms were favorable.”

Trump is just as apt to fold on other matters. On a June 2017 call with Saudi Arabia’s King Salman, according to The Washington Post, Trump was supposed to scold the Saudis for their offensive against Qatar. After Salman delivered a flattering series of compliments, the president dropped his objections.

In December, when the U.S. announced it would recognize Jerusalem as the capital of Israel, the UN General Assembly voted overwhelmingly to condemn the move. Trump said the U.S. would withhold aid from those who voted for the resolution. “Let them vote against us,” he said. “We’ll save a lot. We don’t care. But this isn’t like it used to be where they could vote against you and then you pay them hundreds of millions of dollars.” Yet when the White House released its budget for 2019, “not a single country lost funding on the basis of voting against the U.S. at the UN,” John Hudson reported. More recently, he made a similar threat to countries that don’t back a joint North American bid for the 2026 World Cup, raising the question of why any country should take the threat seriously.

In January, Trump met with Senate Minority Leader Chuck Schumer with a government shutdown looming. In exchange for Democrats backing funding for increased border security and possibly a wall, Trump agreed to back a deal to replace daca, the executive order creating a legal status for unauthorized immigrants brought to the United States as children. Hard-liners in the White House thought the deal was such a giveaway, in fact, that Chief of Staff John Kelly reportedly called Schumer and torpedoed it.

In February, Trump held a meeting with members of Congress to discuss gun control following the school shooting in Parkland, Florida. He ridiculed lawmakers for being too timid in confronting the NRA and asked them to take up proposals opposed by the group. Days later, he met with the NRA, and when he unveiled his slate of ideas to combat gun violence, it included none of the proposals the NRA opposed.

Why is Trump so apt to fold? One reason is that he is surrounded by advisers who often feel that his ideas are bad and try to talk him out of them. The Iran-deal withdrawal came only after National-Security Adviser H.R. McMaster, who supported the deal, was pushed out and replaced with the more hawkish John Bolton. Beyond that, however, Trump brings two big weaknesses to the table.

First, he’s not as skilled a negotiator as he likes to pretend, and second,

he seldom puts in the time to learn the facts about whatever he’s handling.

In April, Jonathan Swan had an illuminating post about Trump’s one-dimensional approach to negotiating:

President Trump tells people he keeps the world guessing with his wild unpredictability. But those who work most closely with him say he’s a one-trick pony in negotiations.

The trick: Threaten the outrageous, ratchet up the tension, amplify it with tweets and taunts, and then compromise on fairly conventional middle ground.

“His ultimate gamble is: ‘You don’t have as big of stones as I do,’” a source close to Trump told me. “‘You’re going to feel too uncomfortable where I go. The stakes are too high. This is too far outside your comfort zone.’”

This turns out to be an effective tool, because not many people have Trump’s appetite for awkwardness. But if it doesn’t work, the president has few other tools at his disposal, and tends to back down.

Trump is also at a disadvantage because he doesn’t bother to do his homework. The president has strong instinctive views, but little tolerance for studying facts. During the campaign, he said he’d figure out what he needed to know once he won, but since taking office he hasn’t bothered. That means he’s already ceded the debate over reality to his opponents, as when China’s Xi laid out his history lesson on Chinese–Korean relations.

The president’s single negotiating trick and lack of interest in facts threaten to come together to dangerous effect in his upcoming summit with North Korea’s Kim. That is, assuming it happens: The Times reported on Sunday that Trump was starting to get cold feet about it, and he said on Tuesday that the meeting might be delayed beyond the scheduled June 12 date.

Trump has portrayed even the fact of this meeting as a major breakthrough, and evidence that he can get done what other presidents could not. He managed it in part, however, by backing down. In November 2017, he said that North Korea must fully denuclearize before he would consider talks. Pyongyang made no such commitment before Trump announced the summit, though.

Should the meeting come together, however, Trump will be in a high-stakes conversation with Kim. This is risky because, as past experience has shown, Trump is easily susceptible to flattery and other forms of persuasion when meeting face-to-face with foreign leaders. He will also face a disadvantage on the facts. The nuclear program has been central to North Korea’s national policy for years, while for an American president it is just one of scores of important issues, and Trump’s aides say he has made little effort to cram.

“Going into the North Korea meeting, senior administration officials say, the president has been almost singularly focused on the pageantry of the summit—including the suspenseful roll-out of details,” the Associated Press reported Tuesday. “He has not been deeply engaged in briefing materials on North Korea’s nuclear program, said three people with knowledge of the White House efforts.”

This doesn’t mean that Trump will necessarily fold when he meets Kim in Singapore. What makes a summit like this so interesting, and risky, is how unusual and volatile it is. It matches up two leaders who are unusual and volatile themselves. Both have a long history of ostentatious bluster, and spotty records of follow-through. When they’re eyeball to eyeball, it’s an open question which one will blink first, but history suggests it’s likeliest to be Trump.

To China, All’s Fair in Love and Trade Wars

The standard line from President Donald Trump and those who support his get-tough approach toward Beijing is that because China sells more to the U.S. than the other way around, Washington has the upper hand in its game of tariffs. “China buys MUCH less from us than we buy from them,” Trump recently tweeted, “so we are in a fantastic position.”

.. While Washington hiked tariffs from 10 percent to 25 percent on $200 billion of Chinese products, and is threatening to slap on even more, Beijing responded by increasing tariffs on only about $60 billion of American goods.

In practice, though, the fight is not as uneven as the trade—China has many weapons at its disposal beyond tariffs to make life miserable for American chief executives.

The intrusive Chinese state has all sorts of levers to control the economy and society, and in an environment that lacks rule of law, officials can pull them at their pleasure. They also have far more targets to aim at than the trade data suggest. Many American companies have substantial operations within China that are tremendously important to their bottom lines. General Motors and its partners, for instance, sold more than 3.6 million vehicles in China last year, almost all of them manufactured locally. Starbucks operates more coffee shops in China than in any other market aside from the United States. These businesses are vulnerable to government-inspired nefariousness, from product boycotts and state-press smear campaigns to regulatory investigations

The Chinese have employed such tactics in the past. In 2017, for instance, China’s government waged an undeclared war against South Korean business over a dispute regarding an American missile-defense system. When Seoul rebuffed Beijing’s demands that it cease deployment of the system—which the Chinese considered a threat to their security—China tried to compel the South Koreans by pressuring their companies and economic interests.

A primary target was Lotte, a Korean conglomerate with interests in candy, hotels, retail, and other businesses. Lotte committed the crime of providing land for the missile system. The Chinese government whipped up nationalist ire against the company through the state-controlled media. One op-ed in the Global Times, a newspaper run by the Communist Party, entitled “Lotte’s Development in China Should Come to an End,” thundered that “showing Lotte the door will be an effective warning to all the other foreign forces that jeopardize China’s national interests.” Protests erupted in front of supermarkets owned by the Korean group, while inspectors ordered outlets closed after supposed violations. Sales plummeted, and Lotte eventually exited from the business. That wasn’t all. Chinese shoppers also shied away from Korean-branded cars and cosmetics. Korean pop stars were denied entry visas; group tours to Seoul for big-spending Chinese travelers were canceled.

Canada is enduring such treatment right now. Angered that Canadian authorities (at the behest of Washington) arrested the chief financial officer of the Chinese telecom giant Huawei Technologies, Beijing blocked Canada’s exports of pork and canola, pinching the country’s agricultural sector. China has taken this step even though it isn’t in its own economic interest, since its domestic pork industry has been ravaged by swine flu. Similarly, in 2012, Chinese quarantine officers began impounding Philippine bananas amid a flare-up over contested claims in the South China Sea.

Chinese officials can twist laws and regulations to turn up the heat too. For example, they have used anti-monopoly law against foreign companies in ways that inhibited their business. In one famous case in 2013, Mead Johnson, Danone, and other foreign firms were heavily fined for supposed pricing infractions. The U.S. Chamber of Commerce at the time argued that the anti-monopoly probes “often appear designed to advance industrial policy and boost national champions” and “rely insufficiently on sound economic analysis.” Chinese regulators have already claimed one victim in the current trade dispute—the microchip company Qualcomm, which had to abandon its acquisition of a Dutch firm when Beijing failed to approve the deal.

Another possible tool—though a less likely option—is the Chinese currency, the yuan. Though it floats more freely these days, the central bank still commands a great degree of control over its movements. Chinese authorities could depress its value to make the country’s exports cheaper in global markets, offsetting the extra costs imposed by Trump’s tariffs.

So far, Beijing has kept its powder dry. Careful not to appear the aggressor, China’s leaders have tried to match their retaliation in its timing and scope to Trump’s. But only to a point. Julian Evans-Pritchard, a senior China economist at the research firm Capital Economics, recently noted that government officials have leaned on state-owned enterprises to curtail purchases of U.S. products such as soybeans and natural gas, engineering a sharp decline in those imports. That’s one reason why American exports have proportionately been hurt more than China’s in the trade war. According to data from the U.S. Census Bureau, American exports to China in the first quarter of 2019 dropped by 19 percent from the same period a year earlier, while China’s exports to the U.S. have fallen 14 percent.

One weapon that will likely remain sheathed is Chinese holdings of U.S. government debt. China is the largest foreign holder of U.S. Treasury securities, with $1.1 trillion of them, and that has fed speculation that in a pinch, Beijing would dump this hoard and disrupt American financial markets. That fear was further fueled this week when new data showed that China in March sold the most Treasuries since 2016. Still, selling them en masse is highly improbable, since doing so would also depress the value of China’s own wealth.

Still, could Apple or Coca-Cola end up in the crosshairs like Lotte? Don’t dismiss it. Trump himself has opened the door to targeting individual firms in the course of this dispute, by signing an executive order this month allowing the U.S. to ban telecommunications firms from using equipment from foreign companies that pose a security risk—read Huawei here. As Beijing knows, all’s fair in love and trade wars.

Killing the Pax Americana

It’s more implicit in the case of the United States. But the historical record is pretty clear: the postwar trading system grew out of the vision of Cordell Hull, FDR’s Secretary of State, who saw commercial links between nations as a way to promote peace. That system, with its multilateral agreements and rules to limit unilateral action, was from the beginning a crucial piece of the Pax Americana. It was as integral to the postwar order as the I.M.F., which was supposed to provide a safety net for nations having balance of payments trouble, or for that matter NATO.

And Trump’s trade war should correspondingly be seen as part and parcel of his embrace of foreign dictators, lack of respect for our allies, and evident contempt for democracy, at home as well as abroad.

But wait, you say: China is neither an ally nor a democracy, and it is in many ways a bad actor in world trade. Isn’t there a reasonable case for confronting China over its economic practices?

Yes, there is — or there would be if the tariffs on Chinese products were an isolated story, or better yet if Trump were assembling an alliance of nations to confront objectionable Chinese policies. But in fact Trump has been waging trade war against almost everyone, although at lower intensity. When you’re imposing tariffs on imports of Canadian steel, on the ludicrous pretense that they endanger national security, and are threatening to do the same to German autos, you’re not building a strategic coalition to deal with a misbehaving China.

What you’re doing, instead, is tearing down what’s left of the Pax Americana.

Wasn’t this inevitable in any case? I don’t think so. True, U.S. economic dominance has been eroding over time, not because we’re getting poorer, but because the rest of the world is getting richer. But there was reason to hope that a relatively peaceable international order could be sustained by an alliance of democratic powers. In fact, until a few years ago it seemed to me that we were seeing exactly that taking place for the world trading system, which was transitioning from largely benign U.S. hegemony to a comparably benign co-dominion by the U.S. and the E.U.

At this point, however, things look a lot bleaker. It’s not just Trump. And it’s not even just Trump plus Brexit. The Europeans are also turning out to be a big disappointment. As I said, if they can’t even deal with the likes of Viktor Orban within their own community, they’re definitely not up to providing the kind of leadership the world needs.

But where the Europeans are weak, Trump is malign. He’s working actively to make the world a more dangerous, less democratic place, with trade war just one manifestation of that drive. And the eventual negative consequences for America and the world will be much bigger than anything we can capture with economic modeling of the effects of tariffs.