Losing the Game of Chicken

Morning Dispatch

In the wake of Donald’s announcement that he would be raising tariffs against China again, trade relations between China and the United States have completely melted down. Donald's grand-standing is having serious negative and far-reaching consequences for the future of the American economy.

In the immediate aftermath of the fallout, ABC News's Rachel Scott broke down the newest escalation in the trade war:

Overnight, the trade war between the US and China escalating as Beijing raises its tariffs on American goods to 125%, set to take effect [April 12]. Chinese President Xi Jinping saying there are no winners in a tariff war and warning going against the world will only result in self-isolation…

The market rebounded after the announcement of his 90-day pause, but that was short-lived — much of the gains wiped out as investors sold off after the rally. A new estimate from the Yale Budget Lab says the new tariff system will cost households an average of $4,700 annually, with a staggering 145% tariff on Chinese goods. Economists warned things could go from bad to worse if a deal isn't made.

And now, according to The New York Times, this is happening:

China has suspended exports of a wide range of critical minerals and magnets, threatening to choke off supplies of components central to automakers, aerospace manufacturers, semiconductor companies and military contractors around the world.

Shipments of the magnets, essential for assembling everything from cars and drones to robots and missiles, have been halted at many Chinese ports while the Chinese government drafts a new regulatory system. Once in place, the new system could permanently prevent supplies from reaching certain companies, including American military contractors.

Donald’s massive and completely unnecessary escalation against China marks the most aggressive and worrisome move yet in his unraveling of a trade relationship that helped shape global markets over the course of the 21st century. Economists warn the rupture could devastate both country’s economies. At stake for us is not just trade, but economic stability as well as the trust that has been built between us and our trading partners over a generation.

This is not simply about a megalomaniacal ignoramus playing chicken with an opponent (in this case China) who can completely outmaneuver him in a trade war. We're talking about the dismantling of relationships that define global commerce and undergird the stability of the global markets.

Despite being our adversary in many ways, China is also one of our biggest and most significant trading partners. Because Chinese goods are so readily available and inexpensive, Americans have come to rely on them. That could all change because slapping a 145% tariff on Chinese products is going to make many, many of them unaffordable to most Americans. Experts worry that countries will soon have to choose between giving their business to China or the United States — a fear that's very quickly becoming a reality.

At this point, why would anybody choose us?

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We’re less than two weeks into the escalation of Donald’s unbridled tariff insanity and, in addition to the increasingly hostile and damaging situation with China, the United States is also losing major European trade partners.

The European Union recently agreed to start negotiations with China on electric vehicles, and it's possible that the EU will lower tariffs on China. China’s President Xi is also set to visit Vietnam, Malaysia, and Cambodia — who used to be strong US trade allies — in order to build stronger trading partnerships with countries currently suffering from America’s imposition of tariffs on their exports.

Donald isn't bringin business to America—he's pushing it to China.

This is where the idea of soft power comes into focus. Donald only knows how to engage in dominance politics, which is exactly the wrong approach here. First of all, he's not even good at it. He's inherently weak and does not know what he doesn’t know. He also fails to understand that in order to win a game of dominance you have to have the stronger hand, but because of his ill-advised and reckless approach, he has squandered America's strength. What past American leaders have understood is that trade negotiations require nuance, cooperation, compromise–and negotiating.

Donald is incapable of deploying soft power because he doesn’t understand it, it would require a mindset that is utterly foreign to him, and, quite frankly, he's insane, which is not a particularly satisfying explanation even as it has the benefit of being true.

China, very smartly, is using its soft power to foster relationships with our former trading partners and to fill the void left by America’s abandonment of reliable and steady leadership on trade.

America is not only losing business, we're losing the jobs Donald promised to the American people before he began unilaterally and irrationally imposing tariffs. New jobs that people were anticipating are no longer available.

Workers in Pennsylvania are already suffering as a result. A planned $300 million plastics plant in Pennsylvania, which would have created 300 new jobs, has been scrapped due to the combined impact of the Trump regime-era tariffs and federal budget cuts. The developers cited increased costs from the tariffs on raw materials such as steel and aluminum, which made the project financially unviable.

And ABC4 Utah reported on a devastating closure for Americans in Utah:

Utah Iron is shutting down mining operations in Iron County. The company cites significant fluctuations in global markets and the uncertainty that comes with that.

Utah Iron says the immediate closure will impact hundreds of employees and the businesses and of course major transportation providers the company works with.

America First, indeed.

Across the board, the American economy is being adversely affected — from higher prices and inflation to job security to the fact that, in some cases, American manufacturing is grinding to a halt.

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Chinese factories produce more than those in the United States, Germany, Japan, South Korea, and Britain combined. Here’s a breakdown of some of the statistics:

China is a major producer of electronics in the United States, including:

• 73% of smartphones

• 78% of laptops

• 87% of video game consoles

iPhones, laptops, video games, toys, clothing, and much more are about to get a lot more expensive for the American consumer.

The entire venture regarding the imposition of tariffs on our trading partners — our closest trading partners, our biggest trading partners — is beyond comprehension if you consider that the stated rationale for it is ostensibly to make America a stronger presence in the global economy.

Donald, obviously, fundamentally misunderstands how tariffs work, which is very cold comfort because nobody seems to be able to explain it to him in a way he can comprehend, and even if that were possible, he will never change course.

At this point, even if he were capable of course correcting, there will be long-term damage. We cannot pretend that just because the stock market had one really good day last week that all of the losses and all the harm done during the preceding two months were erased. People lost their jobs. People lost a lot of money. Uncertainty and chaos continue to lead to market volatility. Things are still becoming increasingly unaffordable and inflation is still on the rise. As prices get higher, businesses have a choice: They can raise prices on their goods and services — potentially pricing them outside of the capacity of their consumers to afford them — or they keep prices low, which cuts into their profits and subsequently their ability to make ends meet.

That's basically the calculus here.

Donald, of course, claims that his tariff ploy will force companies to move manufacturing to the United States — and once manufacturing is in the United States, all of our problems will be solved.

But just because he says it does not make it so. It's far more complicated

Here’s how NBC News's Yasmin Vossoughian explains it:

Let’s rewind to the 1970s. Back then, nearly 20 million people in the United States made their living from manufacturing, accounting for more than a fifth of total employment.

But then — globalization starting in the '80s. NAFTA in the '90s. China joining the World Trade Organization at the turn of the century — it all shocked the system. Cheaper labor abroad meant lower prices and closed factories here. What we call the China trade shock.

Now, manufacturing employs only about 8% of the nation’s workers. Many economists who study these massive trends are skeptical about the ability of tariffs to turn back time.

The US has spent decades shifting from a focus on manufacturing to a focus on the financial sector, intellectual capital, and technology—which has ultimately been a good thing for US consumers and workers.

As a result of this shift, US supply chains have spread out across different countries. It would take an enormous effort to bring manufacturing as a whole back to the United States and it’s not clear that it’s even something we should do.

Experts also point out that companies making the decision to move factories to the United States are still facing tariffs and there’s no way to know, given Donald’s intransigence, whether or by how much those tariff rates will change on a daily basis. That means, overall, the chance that moving to the United States would be a bad investment is quite high.

Maybe the restoration of American manufacturing was the rationale for the tariff debacle in the first place. Imposed tariffs create incentives over time—but that requires patience. It requires nuance. And, obviously, it requires a fairly deep understanding of what you’re doing and the consequences of your actions.

Besides, it almost certianly is not the best thing for the future of the United States to do what the fascist regime constantly seems to want: go backward–back to the good old days when manufacturing jobs comprised over 30% of all private sector employment (it’s now 9.7%); when coal was the dominant fuel source; when there were no regulations protecting us from dangerous work place conditions, or pollution, or exploitative corporations.

Over the decades we, along with our trading partners, have devised a solution that works, if imperfectly. The way forward would have been to continue to strengthen our trading alliances and create a future that is more sustainable and better for the workers of the United States and the rest of the world.

But Donald Trump and the rest of his fascist cabal—they don’t care about any of that. They are not and never have been interested in creating anything better. They only know how to tear things down.