Editor’s Note: Stephen Moore is an economic adviser to FreedomWorks, a conservative advocacy group, and a CNN economic analyst. He was a senior economic adviser to the Trump campaign. The views expressed are his own.
Last Friday on “CNN Tonight,” Don Lemon half-jokingly said that after the Dow dropped due to fears of a trade war with China, he was afraid to look at his 401K. There’s no doubt that Wall Street hates any talk of tariffs and trade wars, as evidenced by the big tumble in stocks last week. I’m hardly a fan of them either, and there’s no one who wants a continued booming stock market more than I do (perhaps with the exception of Donald Trump).
But today, there’s so much more at stake than the short-term fluctuation in stock values. This trade confrontation with China is a significant and long-run story. How this dispute plays out in the weeks and months ahead will have national security and economic growth repercussions for many years to come.
Here’s why: China is aggressively vying for economic superiority over the United States, as the “Made in China 2025” initiative makes clear.
Trump seems to have recognized before anyone else in Washington (why were Bush and Obama so asleep at the wheel?) that China has become a clear and present danger to the United States on many fronts.
Beijing blatantly cheats and steals intellectual property, costing the United States hundreds of billions of dollars a year, and threatens the security of some of our allies – Taiwan, Japan, and Australia, to name a few. It is rapidly building its military, illegally laying claim to waters and territories to expand its empire, and with the elevation of Xi Jinping as essentially President for life, may be throwing the hope of any move toward democracy out the window. State-owned enterprises are on the rise, not the decline, in China.
Welcome to the 21st century version of the Soviet Union. We are not dealing with a friendly ally, but, increasingly, an adversarial enemy. Better to have the showdown now over trade and China’s economically mercantilist policies than to slide into a hot war with China a decade from now.
We can and should have a spirited argument about the advisability of Trump’s call for new punitive tariffs against China. Perhaps there are more effective and less economically destructive ways we could be sanctioning and penalizing the Chinese to get them to act like a civilized and law-abiding nation.
But the opponents of Trump’s policy rarely suggest any tough and promising alternative. Many advocate a continuation of the status quo – which gets more unsustainable with each passing day. Trump’s critics are sounding more and more like Neville Chamberlain waving the banner for “Trade Peace for Our Time.”
Even more dangerous is that many Republicans and Democrats are publicly advocating that Trump stand down because America might not win this fight with China. They warn that China might curtail its purchasing of US bonds, which would arguably hurt them more than us, or that China will impoverish our farmers if they don’t buy our pork and soy beans.
For Trump, this is surely a defining moment of his young presidency. It is reminiscent of John F. Kennedy circa 1962, unflinchingly staring down the Russians during the Cuban missile crisis. Trump should also learn a historical lesson from Reagan. In 1981, when Reagan made the gutsy executive decision to fire the illegally striking air traffic controllers, many in the White House advocated for giving in so as to maintain labor peace and keep the planes in the air. Instead, Reagan showed the world he was a President who wouldn’t back down.
To win this long overdue stare-down with China, Washington needs a totally unified and bipartisan display of strength and steely American resolve – much like the nation showed after 9/11. Is it possible that Chuck Schumer and Nancy Pelosi could put politics aside for the good of the nation and rally around the flag here? Is it possible for corporate America to put short-term profits aside for a moment and join in this crusade against a tyrant that is attacking American business every day?
My hunch is that the American people – even those who don’t like Trump – will be highly supportive of this strategy.
If that happens, Beijing will realize it is fighting a losing battle here. The Chinese will almost certainly stand down and begin to make the kinds of concessions that Trump is rightly demanding. No more cheating. No more stealing. Firm and verifiable commitments to buy more, not fewer, American-made products.
Notably, this week Xi Jinping announced that China will be lowering tariffs on auto imports this year and expanding global access to its markets. In addition, he stated his commitment to the protection of intellectual property in China. With American fears seemingly allayed, the Dow rebounded over 400 points.
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If America continues to stand its ground, the threat of a hot war with China anytime soon will be greatly lessened. It will also mean that the stock market here and in China will explode with growth as we move closer to a genuine free trade partnership. And Don Lemon and the countless Americans who own stock won’t have to worry about their 401k plans anymore.