http://www.wsj.com/articles/trump-would-make-china-great-again-1461258110Trump Would Make China Great AgainHis tough talk on trade masks a see-no-evil approach to the real threats from Beijing.
By DAVID FEITH
April 21, 2016 1:01 p.m. ET
China did Donald Trump a favor this week—by insulting him. In an interview with this newspaper, Chinese Finance Minister Lou Jiwei called the New York businessman an “irrational type” whose trade policies would leave the U.S. no longer “entitled to world leadership.” The Donald boasted in reply: “I’m so glad they’re upset. They haven’t been upset with us in 30 years.” American leaders have let China “abuse” us, he told a Staten Island crowd, but “that’s not going to happen anymore with me.”
A classic Trump promise: clear, tough, baseless. The reality is that China does abuse the U.S., just not in the ways Mr. Trump emphasizes. And if he wins the Oval Office, China may benefit more than any country in the world.
Consider his lament this week that “we have a trade deficit with China of $500 billion per year,” a favorite figure. “This is the greatest theft ever perpetrated by anyone or any country, what China has done to us,” he roars. “They have taken our jobs, they have taken our money.” But it ain’t so.
The U.S. trade deficit with China is really $366 billion, so he was off by a third. Forgive that as Trumpian flourish and he’s still wrong to decry the deficit.
All a deficit means is that Americans import more goods than they export, and also—by definition—that foreigners buy more U.S. stocks, bonds and other financial assets than Americans buy of theirs. In other words, U.S. shoppers and businesses save money by buying cheaper foreign goods, while the U.S. attracts investment from overseas that boosts U.S. productivity and spending power. These are good things.The bilateral trade balance is an especially misleading figure because it’s calculated in an anachronistic way conceived before the age of global supply chains. An iPhone finished at a factory in Guangdong and sold in Chicago adds hundreds of dollars to the U.S. deficit, even if the Chinese manufacturer earns less than $10 for its work. Apple and other U.S. firms earn far more for their design, marketing and assembly work, yet that’s unseen in the bilateral balance.
Similarly obscured by Mr. Trump is the main cause of lost U.S. manufacturing jobs: not imports from China (or Mexico or Japan) but computers, robots and other technological changes—by as much as 10 to one. Which explains why industrial job losses began in the 1970s, before the trade openings of the 1990s, and have continued fairly steadily. And why tariffs wouldn’t bring jobs back, even as they’d cost Americans billions in higher prices, violate trade rules and invite Chinese retaliation.
President Obama’s 35% tariff on Chinese tires in 2009 saved at most 1,200 U.S. tire-manufacturing jobs while costing Americans $1.1 billion in higher prices, or $900,000 per job saved, according to the Peterson Institute. China retaliated with tariffs on U.S. chicken parts, costing American farmers about $1 billion in lost exports.
An across-the-board tariff would dwarf such carnage. In threatening one, Mr. Trump is like a robber holding a gun to his own head and declaring, “Your money or my life.”
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