Trump And Trade: The Point Of No Return? : Planet Money President Trump has kept his protectionist promises, but his scorched earth approach to dealmaking could have damaged global trading relationships for good.
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Trump And Trade: The Point Of No Return?

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Trump And Trade: The Point Of No Return?

Trump And Trade: The Point Of No Return?

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CARDIFF GARCIA, HOST:

Hey everyone. This is THE INDICATOR FROM PLANET MONEY. I'm Cardiff Garcia, and I'm joined today by NPR politics reporter Danielle Kurtzleben. She's back. She's going to be with us for a couple of weeks. Danielle.

DANIELLE KURTZLEBEN, HOST:

Hello.

GARCIA: How's it been?

KURTZLEBEN: It's been exhausting.

GARCIA: Busy - you've been on the campaign trail, yeah.

KURTZLEBEN: I've been out there. But I get to go to Iowa.

GARCIA: I know, where you're from.

KURTZLEBEN: The greatest state in the union.

GARCIA: People should know, by the way, that even though you're a politics reporter, your specialty is economic policy.

KURTZLEBEN: Right, yes. There's a reason I'm here. It's not like you just reached into the NPR hat and pulled my name out.

GARCIA: Because we love you. That's why, OK?

KURTZLEBEN: Yeah. Yeah.

GARCIA: But seriously, listeners, if you've got questions about economic policy in particular for Danielle...

KURTZLEBEN: Right.

GARCIA: ...While she's here, take advantage of it. Email us at indicator@npr.org or find her on Twitter at @titonka.

KURTZLEBEN: Titonka...

GARCIA: Yes.

KURTZLEBEN: ...Which is the town I'm from. But, yeah, you have a question about a candidate's policy - economics, health care, something in that realm - let me know. I would love to hear it.

GARCIA: Get at her.

KURTZLEBEN: Yeah.

GARCIA: That's right. And for now, on with today's show. And speaking of economic policy, if you had to boil down the Trump administration's approach to trade into a couple of main points, the first might be that he's been challenging the institutions that oversee global trade, the institutions that determine the rules by which countries trade with each other, like the WTO, the World Trade Organization.

The second point, of course, to make is that there's been this huge trade war with China in which both countries have enacted huge tariffs on each other's goods.

KURTZLEBEN: Right. And there's been a lot of heated debate on the wisdom of this approach. And most people have at least assumed that this is all part of a larger negotiating strategy by the Trump administration.

GARCIA: Yeah, but what if that's not true? And what if, frankly, it's too late anyways, so that even if the Trump administration does get the trade deals it wants, the damage that's been done to the global trading system can no longer be undone? These are the possibilities explored in a big new essay in Foreign Affairs magazine that's been co-authored by our old friend Chad Bown at the Peterson Institute.

Today on the show, a chat with Chad about this pessimistic but increasingly realistic view of the Trump administration's approach to trade.

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GARCIA: Chad, welcome back.

CHAD BOWN: Thanks for having me.

GARCIA: So, Chad, this piece in Foreign Affairs - I got to say it was bracing. It was not a happy story that you tell. And there's one line in particular that really kind of took me aback, I got to say, and it's this one - in some respects, there will be no going back. That's amazing. What do you mean? No going back from what?

BOWN: I think to the way the system was. You know, the relations that the United States and China and a whole lot of other countries had around the world where we all seemingly played by the same rules in one, you know, sandbox together - that now seems, you know, the distant past. And what the future, you know, has ahead is a really big unknown. And so this isn't just the China thing. What the Trump administration has done is to really upend the global trading system by how it's actually treated the rules themselves. And there's a couple of different ways that it's done this.

There's this international institution out there called the WTO, the World Trade Organization. President Trump tweets about this from time to time. He doesn't particularly like it. But that being said, it's an institution that was created by the United States that has largely worked to set up a model of trade that's in America's interests. And the Trump administration has threatened that. They have withheld the appointment of judges to its independent judiciary, so it's making it impossible now to effectively have binding dispute settlement. And this is, you know, when countries have little frictions with one another over trade matters, this is how it used to be handled. That system is soon going to be dysfunctional. And the problem there is...

GARCIA: Wow, you think the damage is that bad that it will soon be dysfunctional because of the U.S. challenging it.

BOWN: Yeah. I mean, they're now at the stage where they basically don't have enough judges, and the Americans are refusing to allow the appointment of new judges. And without these judges, you can't have cases. And without cases, countries try to resolve matters between themselves. And as we're seeing elsewhere in the world, you do have frictions popping up between other countries, and now they can't effectively go to the WTO to have some intermediary stop their little, tiny trade spat from escalating into some bigger trade war. And so this really does have the possibility of not just affecting U.S.-China relations but trade between other countries as well.

GARCIA: I want to turn now to the other focus of the piece, which is the relationship between the U.S. and China. Everyone's wondering when the two countries will strike a deal, but you make the case that no matter what happens in the short term, whether or not there is a deal, that might not be the point - that, actually, the Trump administration's goal might be to completely decouple the U.S. and Chinese economies.

BOWN: The long-standing concerns of the Americans - and this predates the Trump administration - has been the evolution of the Chinese economy - it becoming less market-oriented over time, lots and lots of subsidies, not treating, you know, in a way that we would like intellectual property that might be owned by American or other Western companies.

But I think the bigger concern is how you then address that problem. And do you seek to engage with China and offer it, you know, carrots to get it to make the kinds of economic reforms and changes that you would like to see it make, or do you kind of hit it with sticks, as we're seeing with these tariffs, and then you put demands on the table that are so exacting that there's just no way that the Chinese government could actually agree to them?

And effectively, that's a - that's the sense in which, you know, the Trump administration's demands can be taken. They're basically asking for economic regime change within China - for it to, you know, almost seemingly overnight change the way that the Chinese economy operates.

So, you know, if there are companies out there that are currently operating in both markets, and there are a lot of them, if all of a sudden they're being forced to choose, how is it that they're going to choose? You know, how are they going to operate differently? And I think it even goes beyond companies, right? You can imagine lots of countries out there in the world being put in that same position as well, being told, you need to choose; it's either us, the United States, or it's them, China.

And I do think there's a separate concern, which is, you know, how is this viewed from China's perspective? China's eyes have really been woken up. You know, the fact that at a couple of different moments over the last year, 18 months, it's found that some of its key industries in the, you know, the telecommunications sector, these big, you know, phone companies - they're so reliant on American technology and American semiconductors and American products to be able to make the things that they make, they're now worried and saying, whoa, maybe we need to do this decoupling thing. Maybe we need to become a lot more self-sufficient. Maybe it's the Americans all along who really aren't that reliable in the trading system. And I think that has been pushed faster along by some of these actions the Trump administration has taken. So that's, I think, another argument why we are now at sort of this - past this point of no return, where things just are now very different than they were in the past.

GARCIA: Yeah. And my last question, Chad, is how do you think we got here? I mean, President Trump wasn't coy that this is what he wanted to do. He ran on quite a protectionist platform, and he was voted into office, so there is some not-insignificant part of the country that agrees that this is the approach that should be taken, even if it's damaging to the U.S. economy in the long run. What do you think happened that so disillusioned people to the global trading systems that existed before and to America's increasing intertwinement with the Chinese economy?

BOWN: I think it's a couple of different things. I think you're exactly right. You know, where we are with China right now is very much President Trump living up to the campaign promises that he made back in 2016, where he said, you know, he wanted to put tariffs on everything that we import from China. That - you know, that's where we find ourselves now.

But I think it's also the case that President Trump hasn't necessarily been very clear what his endgame in all of this was. He's made it seem as though he really wanted a deal this whole time with China. And I think we just have to take very real the possibility that that wasn't the goal all along - that maybe the goal, in and of itself, was just the tariffs, and by making demands of China that were so unrealistic, that that's where we're going to end up.

GARCIA: Chad Bown, thanks so much, man.

BOWN: Thanks for having me.

GARCIA: Tell everybody where they can find this article again.

BOWN: So this article is with Doug Irwin, a colleague of mine here at the Peterson Institute, and it is in the September-October edition of Foreign Affairs.

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GARCIA: This podcast was produced by Darius Rafieyan, edited by Paddy Hirsch and fact-checked by Emily Lang. THE INDICATOR is a production of NPR.

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