Published reports suggest that the Trump Administration is prepared to take some fairly drastic action to counter China’s failure to protect the intellectual property of American firms, as well as the protectionist elements of the “Made in China” program. Is this a good idea?
I feel pretty strongly about free trade, but on this issue, Trump has a case. China is not a true market economy; the “Chinese dream” is about the Chinese state, not entrepreneurs; like Trump, but with better reason, the Chinese government clearly sees the world in mercantilist terms; and many Chinese firms are, in fact, effectively arms of the state, not private entities. This is a real problem, and if it isn’t addressed, it’s likely to get worse.
I have two big concerns about whatever Trump is cooking up, however. First of all, starting a unilateral trade war with the Chinese is probably going to be a losing proposition for everyone involved. If we’re going to try and coerce the Chinese, we would be in a much stronger position if we had the support of our traditional allies. Trump, however, is more interested in offending them than in working with them, and they may believe at this point that the Chinese are better free traders than we are. Second, the credibility of this effort is going to be compromised by Trump’s explicit willingness to trade economic chips for help with North Korea. It is more likely than not that no one will take him seriously, because really, why should they?