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July 8, 2019

Musing on the U.S.-China Trade War

In his Sermon on the Mount, Jesus is quoted as saying: “You have heard that it was said, ‘Eye for eye, and tooth for tooth.’ But I tell you, do not resist an evil person. If anyone slaps you on the right cheek, turn to them the other cheek also.”

As a man of faith, I try to incorporate God’s Word into every area of my life. But, imagine the absurdity if we applied this particular Christian tenet to our trade relations with China. Strike that. We have applied this exact modus operandi to our economic relationship with China for decades, and the results have been just that: ABSURD!

First, a bit of history. U.S.-China relations were severed in 1949 following the establishment of communist leader Mao Zedong’s People’s Republic of China. In the early 1970s, President Richard Nixon took steps to reestablish ties between the two countries, aided by the U.S. ping pong team and his Secretary of State, Henry Kissinger. Finally, in 1979, President Jimmy Carter granted mainland China full diplomatic recognition, opening up the channels for formal political and economic activity.

In the 40 years since, the U.S. has repeatedly turned the “other cheek” in its trade relations with China, with increasingly lopsided and disadvantageous results. In 1980, the first year under the new diplomatic scheme, trade between the U.S. and China totaled $5 billion. By 2000, when President Bill Clinton normalized trade relations with China, trade between the two countries had grown to more than $116 billion, with a U.S. deficit of nearly $84 billion. Fast forward to last year: total trade between the U.S. and China reached $660 billion, with a U.S. deficit of $419 billion.

[Don’t forget, China also became the largest U.S. foreign creditor in 2008, and currently holds $6.2 trillion—yes, with a “t”—of U.S. debt.]

Of equal concern, and potentially greater consequence, in 2015, Beijing launched its 10-year plan to turn China into the dominant global manufacturer of high-tech goods, everything from electric cars to information technology and telecommunications to advanced robotics and artificial intelligence. This Made in China by 2025 policy has only ramped up the long-existing dubious behavior of the Chinese government—often in violation of international trade rules—including, but not limited to, intellectual property theft, discrimination against foreign investments, cyber-espionage, and forced technology transfers.

In the face of such absurdity, change was required. At some point, we had to stop turning a blind eye and instead hold China accountable for its foul play. Which is exactly what President Donald Trump did in March of last year. In an act of substantial courage, President Trump announced a series of tariffs on Chinese imports worth $50 billion. As we all know, China responded by imposing retaliatory tariffs of their own, which has since escalated into an overt trade war.

When China implemented its retaliatory measures last year, many of them targeting the agriculture industry, I stated in this column that I understood what President Trump was trying to accomplish—to rebalance the scales of trade between the U.S. and China—and applauded the administration for its aggressive posture, in spite of the pain being felt by farmers from across the country. I felt then, and continue to feel now, that American agriculture is a patriotic industry and would be proud to back President Trump in the defense of our nation.

But I also warned the administration that there are limits to the burden agriculture would be willing to (or should be asked to) bear, and have since repeatedly urged President Trump to bring our trade conflicts with China to a rapid and successful conclusion. The longer this trade war drags on, the more likely our lost market access will become permanent, and no mitigation plan, however helpful, will ever be sufficient to recoup current or future losses.

Our industry is now in the midst of its second major growing season under President Trump’s provocative China trade policy, and we are expectantly bracing for continued market disruptions. As the trade war intensifies—seemingly with new wrinkles added daily—and appears to have no end in sight, the initial grace period many farmers have given the administration may be reaching its statute of limitations.

But before rural America jumps off the Trump bandwagon, I offer the following analysis: We are not simply dealing with a conflict over inequitable trade balances. Nor are we merely at odds over conflicting economic systems or political ideologies. Instead, as one high-ranking Chinese official recently put it, we are being faced with a “clash of civilizations.”

China has been transparent in its aspirations—to catch up with and eventually surpass the U.S., first in technological advancement, then in global superiority. As a capitalist society, Americans generally welcome the competition. However, we all understand that China does not play by the rules. They are bad actors who, if left to their own devices, will seek to achieve their goals by any means necessary. We have a choice to either act now or stand idly by while China accumulates these means on the backs of American companies and consumers.

Make no mistake, we are locked in a battle of cultures. One must eventually acquiesce to the other. Presume, for a minute, that the U.S. adapted its culture to match that of China. Would the Chinese government or their companies be content to negotiate and do business with a partner like themselves? I posit the answer would be “no,” which leads to the logical conclusion that China must therefore begin behaving more like the U.S.

The outcome of this clash of civilizations may very well determine American prosperity—and shape the global landscape—for decades, if not centuries, to come. We must be willing to endure, as an economy and as an industry, a bit more hardship to ensure that future generations of Americans get to compete on a level playing field. But we have our limits.