China Challenge – Much More Than Trade At Stake

President Trump's "America First" promise in his campaign is coming in second to the geopolitics of the real world. Tough talk on trade with China hit a wall when it came up against the prospects of a nuclear-armed aggressor. 

Sharyl: What was President Trump's campaign stance on working with China and his vision of what we ought to do versus what you see happening now?

Peter Morici: President Trump promised a very hard line with China. There's a big trade surplus with the United States. 300 billion a year, at least. At least 200 million American jobs. Since then, he has backed down. What happened was he basically got focused on North Korea, and he swapped North Korea for trade when he didn't need to.

Sharyl: Why do you say he didn't need to?

Morici: China is going to do what it needs to do out with regard to North Korea out of its own national security interests. To the extent that North Korea is a threat, it will take what steps are necessary. Trump did enough by threatening to act unilaterally if other countries in the area did not assist him to get China to act. He didn't have to throw in trade as well, because the last thing the Chinese wants is the Americans going into North Korea even if it's just bombing and so forth, because they are quite concerned about millions of North Koreans fleeing across the border into China. They want stability in the region, this would upset the equilibrium and so forth.

Sharyl: Former Treasury Secretary Henry Paulson praised China for quote "stepping up to keep globalization going forward" what do you think about that?

Morici: I think Secretary Paulson is wrong. He's behaving like a typical New York investment banker, in that he sees opportunities to make loans and finance the Silk Road and all the rest.

Sharyl: The Silk Road refers to a plan China called "One Belt, One Road" the country's vast investment in shipping and transport to develop both a trade route and markets reaching from Malaysia to Europe.

Sharyl: China seems to really be emerging as the global leader in many ways. There's a recent meeting attended by the Philippines, Russia, Turkey, Indonesia, Greece, Hungary, Chile, Argentina, many of them are getting billions in infrastructure investment from china. What does this say to you?

Morici: Well, the Chinese have effectively used the money they have earned on trade, to do two things, one is to build up their next level of industries, they are moving what into what they call indigenous technologies, namely going after our high tech sector. They're not just going to assemble our cell phones anymore. They are going to design the next generation of consumer products and sell them here. Then where is Microsoft? And they are turning it into a great foreign policy initiative. Eurasia really does need a modernization of its east west infrastructure; building better ports, air facilities, railroads and so forth. And China is in position to finance that. This is the largest capital project since the Marshall Plan.

Sharyl: The Marshall plan was the US initiative to help pay and to rebuild Europe after World War 2, named for Secretary of State George Marshall.

Sharyl: If we were to go in the direction of "America First", would that cause the United States to really lose global market opportunities and fall behind?

Morici: If you are going to hardball people and bully smaller rivals and so forth I think it really weakens American leadership. The only way you can fix the trouble spots in the world is if you have the support of your allies.

Sharyl: What do you think changes because President Trump did not follow through on his promises the way he stated them?

Morici: What sadly doesn't change is not a lot changes. We will continue to have a large trade deficit. When it comes down to it, Donald Trump didn't stand up to China. He let down those workers that voted for him, and I think he's going to be a one term president because of it. And if he is, I think he is getting everything he deserves; this was his signature issue and he really shouldn't have backed away from it.