- - Wednesday, November 28, 2018


The United States and China could someday be the ham and eggs, the peanut butter and jelly, of international commerce. Instead of complementing each other’s innovative and industrial acumen, however, the two superpowers have fallen into a trade relationship that, like oil and water, is a recipe for economic indigestion. Only if China swallows its pride and endorses the U.S. appeal for fair trade at the Group of 20 summit beginning Friday in Buenos Aires can both nations come away from the table with success.

The 22-month relationship between President Trump and Chinese President Xi Jinping has produced smiley faces in public but harsh frowns and the hint of a snarl when the doors are closed. When they meet on the sidelines at Buenos Aires to settle their differences over trade, they should save the happy grins for selfies and take sober stock of the economic pain their retaliatory tariffs threaten to cause their countrymen and the smaller economies that follow their lead.

Mr. Trump has talked tough over past trade agreements that have decimated U.S. manufacturing and ballooned the nation’s trade deficits. But he has backed his word with deeds, sealing new deals with Canada and Mexico that promise to keep the North American economy humming. It takes two to tango over trade and we don’t know whether Mr. Xi is prepared to deal, or wait for a pushover successor to President Trump.

Since gaining admission to the World Trade Organization in 2001, China has used its permanent most-favored nation trade opportunities to great advantage. Chinese exports to the United States have nearly quadrupled since then, reaching $505.5 billion in 2017, and U.S. exports have struggled to break into Chinese markets, amounting to $129.9 billion last year. Rules that force U.S. companies to share intellectual property with Chinese partners as a condition of operating in China have cost America between $225 billion and $600 billion annually, according to the U.S. Trade Representative.

This trade imbalance sticks in Mr. Trump’s craw, as well it should, and he regards it as an unmistakeable sign that China is eating America’s lunch. He has imposed tariffs of 10 percent on $250 billion worth of Chinese goods. With the eyes of 1.4 billion citizens upon him, Mr. Xi has responded in kind, placing tariffs on $110 billion worth of U.S. products.

Mr. Trump raised the pressure on China this week in advance of the summit, vowing to raise the tariff level to 25 percent in 2019 and place duties on another $267 billion worth of goods — including Chinese-made iPhones and laptops — if the two sides fail to reach a satisfactory deal in Buenos Aires.

Like a game of chicken, the threat of tariffs is meant to frighten economic competitors into veering away from a crash they can’t survive but can’t resist. With 18 percent of its 2017 exports sold in the United States, Beijing has more to lose than the United States, which sends about 8 percent of its exports to China. “Given the size of our economy, we’re in a position to handle this very well,” says White House economic adviser Larry Kudlow. But neither side can afford a race to the ditch, where games of chicken usually end.

The Donald clearly believes China has been allowed to play the role of the needy neighbor for far too long. He has a point. The Middle Kingdom as a Third World nation of vegetable farmers is a relic of the past. The United States is a rich nation, but not everyone lives the life of a multimillionaire leisurely ordering Chinese-made products from Amazon. Well-paid manufacturing jobs are an essential ingredient of a strong economy. Mr. Trump has added 400,000 of them and he wants more.

Long-term trade confrontation would cause economic damage to both nations and beyond. Exports to China support a million U.S. jobs, according to the U.S.-China Business Council. The International Monetary Fund has revised its July forecast of global economic growth in 2019 from 3.9 percent to 3.7 percent — still robust but weakened by trade jitters. The Organization for Economic Cooperation and Development has scaled back its projection from 3.7 percent to 3.5 percent, and warned growth could slow to 3.0 percent in 2020 if the U.S.-China trade war drags on.

Rather than spoil for a fight, Presidents Trump and Xi should come to the G-20 determined to share a banquet of prosperity. For the sake of global trade, it’s only fair.

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