NEW HAVEN – The United States does not have a coherent trade policy. It has a political strategy masquerading as trade policy that has taken dead aim at China. Unsurprisingly, China has responded in kind. With the two superpowers drawing on their allies for support – the US leaning on the G7 and China turning to the Global South – economic decoupling is the least of our problems.
It is easy to blame US Presidents Donald Trump and Joe Biden for this unfortunate turn of events – Trump for firing the first shot in the Sino-American trade war, and Biden for doubling down on protectionism. Yet the problems predate both presidents – they stem largely from a decades-long misunderstanding of the role foreign trade plays in open economies.
Politicians tend to see trade balances in black and white: surpluses are good, deficits are bad. For the US, where the merchandise trade balance has been in deficit for all but two years since 1970, trade is viewed as bad – a source of leakage in an otherwise strong economy that puts pressure on jobs, companies, communities, and incomes.
From this perspective, America sees itself as the hapless victim of others’ transgressions. Japan was the culprit in the 1980s. Now it’s China. The US also blames the World Trade Organization, which it has effectively neutered by blocking appointments to the WTO Appellate Body for the past five years.
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