April 5, 2017 (Windy Hill Beach, South Carolina) — Trade wisdom from retired Caterpillar exec in today’s Wall Street Journal:
A central issue during the meeting this week will be America’s bilateral trade deficit with China of about $350 billion—more than half of the overall U.S. trade deficit. Whether one is a free trader, a managed trader or a protectionist, there is no denying that trade between the U.S. and China is out of balance. The average American spends 17 times as much on Chinese products as the other way around.
Economists come up with all sorts of benign-sounding reasons for this imbalance: China saves too much; the U.S. doesn’t save enough; Americans simply like to buy inexpensive stuff. Others suggest more sinister causes: currency manipulation, trade barriers or cheating. But regardless of whether the U.S.-China trade imbalance is economically sustainable, the 2016 election demonstrated that it isn’t politically sustainable.
… Some of Mr. Trump’s supporters want him to restrict imports from China sharply. Yet many Americans fear that doing so may spark a trade war… The answer is economic growth. Presidents Trump and Xi, as the leaders of the world’s two largest economies, must certainly realize that robust growth at home would be the best answer to their respective critics. Better to coordinate policies to stimulate prosperity than to cause a confrontation and risk an economic downturn.
… China’s President Xi made eloquent comments at January’s economic summit in Davos about the virtues of free trade. President Trump insists he is a free-trader, too, albeit with caveats. Maybe this is the right time for the two leaders to cut a deal to slash Chinese trade barriers. This would give Chinese consumers increased access to U.S. products, while Mr. Trump could claim a victory for American exporters and their workers. And the whole world would benefit as the U.S. and China -— the twin engines of global economic growth -— start pushing once again in the same direction.
… President Trump has a chance to recenter America’s economic relationship with China not by the saber but through flattery and mutual respect.