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Editor's note: Ken Moak, co-author of the 2015 book "China's Economic Rise and Its Global Impact," taught economic theory, public policy and globalization at the university level for 33 years. This article reflects his opinion, and not necessarily the views of CGTN.
There appears to be evidence pointing to Trump is losing the trade war, explaining the reason why he is escalating tensions with "Communist China" (a term repeated 25 times in his vice-president's speech at the Hudson Institute). In blaming China for everything under the sun and accusing it of a long list of alleged misdeeds, Trump is hoping to garner bipartisan and popular support for his policies and winning the November midterm congressional election and his own re-election in 2020.
Trade war hurts US economy
The tariff-induced higher production costs hit investment hard. According to the US Bureau of Statistics, FDI in the first quarter was -8.2 billion US dollars compared to over +63 billion US dollars in last year's first quarter. The drop was attributed in large part to the trade war with China. Adam Posen from the Peterson Institute of International Economics wrote in a Foreign Affairs article in July suggesting that the decline might be attributable to Trump's bullying tactics, scaring away investors.
Recent world news reports pointed out that China stopped importing US oil altogether, giving the US shale oil and gas industry an unwanted headache. China is the US' biggest oil customer, buying over 330,000 barrels per day. Yes, Canada "imports" more, but most of that is re-routing, US oil transiting through the Canadian side of the pipeline back to American refineries.
Once the tariffs take full effect, stock market values in the US could plunge. For the moment, price gains are mostly from the huge tax cuts.
These are just a few "pains" that Trump's tariffs on Chinese goods inflicted on the US economy.
Trump is not winning the trade war
Trump's policies also have an adverse social effect. The Department of Housing and Social Development (DHSD) reveals that the number of homeless and poor people are rising under Trump. The DHSD estimated that almost 550,000 people were homeless in 2017, an increase of one percent from 2016. That figure is expected to grow because of increased wealth inequality in that the tax cuts and the economic growth benefit the top one percent who will receive respectively 28 percent and 50 percent this year and 2027, according to the Tax Policy Center.
A US Federal Reserve (Fed) study found that over 40 percent of working Americans are struggling to survive, living from "paycheck to paycheck." The United Nations reported that the poor became "more destitute" under Trump because of growing wealth inequality. Many US politicians like Bernie Sanders concur with the UN and Fed findings.
Trade war's impact on Chinese economy insignificant
China is not unscathed by the trade war, but the relevant indicators seem to suggest the Chinese economy might weather the war better than the US. Average projections of the IMF, World Bank and CIA Factbook for China's and US' growth rates this year and the next are respectively 6.8 percent and 6.5 percent and 2.9 percent and 2.5 percent. As I indicated in an earlier article, China has a lot less consumer and public debts than the US. China's corporate debts are high, but most of which are those state-owned banks lent to state-owned-enterprises.
Too, China has many alternative markets and sources of raw materials with 1.4 billion and hundreds of millions more people in the Belt and Road Initiative covered area. Besides, Chinese exports of around 550 billion US dollars account for less than four percent of its over 14 trillion US dollar GDP.
Blaming and ratcheting tensions against China can be costly
US Vice President Mike Pence made a long list of allegations against China at the Hudson Institute, a US conservative think tank, accusing China of meddling in US elections, “debt trap” diplomacy, interfering in US policies, aggression in the South China Sea, “unfair” trade practices, just to name a long list of “misbehaviors”.
The “meddling of elections and policies” were prompted by China's retaliation against Trump's tariffs on Chinese goods. Trump cannot expect China just to sit there and do nothing. The states and businesses that defy his policies are doing what is best for them. China offers investment and trade opportunities to states such as California and businesses like Boeing, General Motors and other Fortune 500 companies.
On the “debt trap” diplomacy charge, the nations receiving Chinese investment and loans would take issue with Pence's remarks. The Sri Lankan foreign minister, for example, indicated in a recent interview that handling over the Hambantota port to a Chinese company was a sound business and justified economic decision, hastening his country's development and making the port financially viable.
The danger of fanning 'fake news' to make war
Rallying the support base with “fake news” like Lyndon Johnson did in Vietnam and George W. Bush in Iraq will likely be costly.
Fighting Vietnam War on the lie that Vietnamese forces fired on a US warship cost over 50,000 US lives and Johnson a second term. The Iraq War, based on an unjustified accusation of Saddam Hussein possessing weapons of mass destruction, cost between 3 and 5 trillion dollars according to studies done by US Economics Nobel Prize winner Joseph Stiglitz and others, over 5,000 American lives and may tarnish Bush's legacy in history.
Trump should have consulted George Bush and talked to Johnson's spirit before taking on China. Unthinkable losses of human lives and properties can be inflicted on the US when it is pushed into a war with lies.