Saving China Jobs—Trump’s New Policy?

Saving jobs in China

How comforting to learn that on the way to Making America Great Again, President Trump is now determined to save jobs in China. Is this his new policy?

In April, the U.S. Commerce Department banned the export of U.S. components to ZTE, a $17 billion Chinese telecom equipment manufacturer. ZTE had violated U.S. sanctions against Iran and North Korea and then lied about its agreement to resolve the issue. U.S. Intelligence Agencies had expressed national security concerns regarding this company’s close connection to the Chinese Government, although it was not a factor in the latest decision to ban exports. FBI Director Chris Wray warned about “the risks of allowing a company or entity that is beholden to foreign governments that don’t share our values to gain positions of power inside our telecommunications networks.”

ZTE is totally dependent upon certain American made components. Unable to obtain these now banned components, ZTE is virtually out of business with the potential loss of more than 70,000 jobs. Without consulting or informing the Commerce Department and Intelligence Agencies, the President abruptly changed policy and regulations on this subject, tweeting, “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done.”

A chaotic, inconsistent and contradictory foreign policy—hope for the best

Aside from the right hand not knowing what the left is doing, these actions epitomize Trump’s narcissistic character. He gives no forethought to the chaos he creates, has no knowledge of the law and is unconcerned with the consequences his actions have on the country. But that can be said of practically every action he has taken thus far in the international arena, most of which are previously announced campaign promises, but none of which have truly been to the benefit of the United States:

withdrawing from the Paris accord on climate change;

disavowing the Iranian agreement on nuclear weapons and reintroduction of sanctions against Iran and those businesses that continue to abide by that agreement;

initiating a trade war with China and allies of the United States with the imposition of tariffs on certain products;

movement of the U.S. Embassy to Jerusalem.

And this list ignores his failure to act against Russian cyber-attacks until recently, and his continued failure to direct a coordinated defense against future cyber-attacks. The United States has always been the leader of the free world. But Trump’s actions are dragging the country toward the position of the world’s pariah. There is no Plan B that addresses the problems these actions create, and there are certainly plenty of them.

Impact of imposing higher tariffs

If the U.S. continues to impose higher tariffs, there will be negative consequences, of which U.S. companies and consumers will bear the brunt. A company required to pay higher tariffs on its imports will obviously now pay a higher price to obtain necessary components and/or finished products. Will the importer be obliged to absorb that higher cost in order to remain competitive, or will it pass on that cost to its customers in the form of higher prices? If prices cannot be raised, can the company absorb the higher cost and remain in business? If the price can be raised, it will be the U.S. consumer that bears the cost of the tariffs. In any event, it is the U.S. company and/or the consumer that pays the piper.

On the other hand, there are U.S. companies whose products are currently at a price disadvantage with foreign imports. These companies will benefit from higher tariffs that will cause prices of foreign competitors to rise. If that were the only variable, imposing higher tariffs would be a great way to solve a trade imbalance. Sadly, reality is otherwise. For example, when the United States raises tariffs on Chinese products, China is likely to retaliate by raising tariffs on products coming from the United States. The overall amount produced by “tit for tat” tariffs in each country will be approximately the same. While some companies will benefit from the higher tariffs, others will not. In the final analysis, the massive trade war proceeding from these actions will harm U.S. industries and consumers as much as other countries.

The application of sanctions and benefits to friends, enemies and oneself

Trump’s latest action with ZTE raises a serious question. He is removing a sanction against a company from a not so friendly foreign power that has willfully violated the laws of the United States. At the same time, he is imposing sanctions against those companies in allied countries that continue to abide by the terms of the Iran deal. With friends like us, who needs enemies?

There are also reports that Trump changed his position shortly after China provided $500 million for the construction of an Indonesian theme park that will include several Trump branded properties; thus, a benefit to the Trump Organization and Donald Trump, personally. If true, will ANYONE in the legislative branch of government consider this a violation of the Emoluments Clause in the Constitution, which prohibits the President’s acceptance of gifts? This is a clause many consider to have been included to keep the President from being corrupted.

To be clear, there may be a good reason for Trump to lessen the impact of the ZTE sanction and its huge effect on jobs in China. Nonetheless, it’s difficult to justify that action with his constant refrain that China has been stealing jobs from the United States. What is readily apparent, though, is that just as with other issues of foreign policy, there is no unified strategy when it comes to trade and tariffs. Just throw stuff against the wall and see what happens.

The coming summit with North Korea

And that is what’s frightening as the President prepares to meet North Korea’s leader to discuss normalization of relations and denuclearization. It is hard to imagine this President taking the time to develop a strategy with multiple options for dealing with different North Korean positions and responses. In fact, he has bragged that he doesn’t need to study these matters since he relies on his own good brain, knowledge and impulses.

Obviously I am in total disagreement with the entire direction of Trump’s foreign policy, but as we approach the summit with North Korea, it is time to make this a nonpartisan sendoff with unified political support to achieve a peaceful accord. I just wish I had more confidence in this narcissistic, temperamental, deceitful and uninformed man.

 

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