Trade talks between China and the U.S. concluded last week with every indication that a deal can be had. Success is still far from a foregone conclusion, and the thorny international issues of North Korea, Taiwan and the South China Sea could hinder a final arrangement. But it looks as if one of President Donald Trump's most roundly criticized moves, the implementation of tariffs on many Chinese goods, could prove a master stroke.
Elite consensus on trade with China had long held that overall gains to U.S. consumers outweighed whatever harm China's manipulation had done to some segments and regions. If China manipulated its currency to allow its producers to underprice U.S. firms, that was just a stupid subsidy that U.S. consumers should bank. If it forced or cajoled U.S. firms to disclose proprietary technology as a condition of working in China, which Chinese firms could later use to compete with those same firms, that was just unfortunate. If it refused to enforce U.S. intellectual property protections and allowed the outright theft of intellectual property, well, that was bad and merited a response — perhaps a strong scolding.
Actually doing anything that could alleviate these misdeeds was beyond the pale. Americans were making money, and nothing ought to disturb the gravy train that was funding so many Wall Street and CEO bonuses.
I have a saying when it comes to any type of negotiations: If you can't walk away, you will overpay. For nearly 20 years, American leaders of both parties had shown they were not willing to even contemplate walking away. Is it any wonder that for decades, many Americans overpaid in terms of lost jobs, declining wages and crumbling communities?
Trump ran to reverse those trends. The elites in both parties heard his talk and immediately labeled him a protectionist. I guess those are fighting words on college campuses and in corporate boardrooms, but in places such as Newton, Iowa, they were a compliment. That's because people saw what Trump would be trying to protect: their jobs, their wages and their towns.
Trump seems to be willing to walk away from bad deals. He knew we were overpaying, and he knew that quiet efforts to cajole better behavior had largely fallen on deaf ears in Beijing. So he turned the tables and started to walk away.
That's all the tariffs were ever meant to do — serve as the stick that would push China to the bargaining table. Trump had to be willing to follow through if that tactic failed, and for the better part of a year he held firm. But in Argentina last month, the Chinese, faced with data showing that their economy was slowing down as ours roared ahead, asked for a truce. Trump accepted, and that's where we stand.
This should serve as a wake-up call to business leaders, economists and politicians. Tough talk backed by tough action can get results. A nation does have to worry about the distributional effects arising from market transactions. It's good business to pay attention to your home country and its citizens, even if the shareholders might get a slightly smaller return.
