Real China threat isn't trade. It's national security and intellectual property theft.
Trump's trade war and tariffs are costly and misguided. His top priorities when it comes to China should be IP theft, security, North Korea and Iran.
For two years, President Donald Trump has told us that the trade deficit is our principal problem with China. It isn’t. Trump is hammering away at the wrong problem. And that means the damaging and quickly worsening tariff war is the wrong remedy.
Trump obsesses over the trade deficit for the same reason he obsesses over television ratings and whether he has more Twitter followers than Barack Obama (latest tally: Obama 108.1 million, Trump 63.6 million). They are simple numbers that convey, at least in his mind, some simple truths.
Trump processes data this way because he is a binary man who boils everyone and everything down into one of two categories— good or bad, winning or losing. Fox News' ratings are strong, so it obviously has credibility. China runs a trade surplus with us, so it's obviously ripping us off. To Trump, it’s just that simple.
We have a services surplus with China
It never is, of course. Here’s where it gets difficult for Trump; complexity disrupts the simple narratives he prefers.
For example, he doesn’t want to hear and never mentions that, according to his own administration’s data, we run a large trade deficit in goods with China but we actually have a trade surplus in services ($40.5 billion last year). He doesn’t want to hear and never mentions that such exports to China have soared 997% since 2001, when Beijing joined the World Trade Organization. He doesn't want to hear and never mentions that U.S. manufacturing jobs have been disappearing since the end of World War II, as we began evolving to a service economy.
Nor does he want to hear and never mentions that millions of these jobs — again, dating back to the 1940s — have disappeared because of more efficient manufacturing processes. It takes fewer people to make widgets than it did 20, 10 or even five years ago, and it’ll take fewer five or 10 years from now. Such complexities are inconvenient to the binary mind.
Of course, and to be fair, many economists correctly note that China has also contributed to the loss of manufacturing jobs over the past 20 years. But it is one cause of several and should be treated as such. That Trump can’t do this is either disingenuous, unintelligent or both.
National security is real China problem
Our real problem with China isn’t that it makes sneakers, toys and furniture more affordable for us and thus runs up the trade deficit. A trade deficit can be seen in many ways. One is that our labor market is strong, that wages are rising, and that we’re spending money. This is why trade deficits generally rise when times are good but fall when they are not. If we’re headed for a downturn like some economists say, you can expect the trade deficit to shrink.
With no disrespect to soybean farmers who are hurting from the tariff war Trump started, our real problem with China is something you can’t see. Try this on for size: up to $540 billion. That’s an estimate by the Commission on the Theft of American Intellectual Property of how much we lose in IP theft each year, with China being the principal bandit.
My farming family is on edge: Trump China trade war is devastating farmers and agriculture exports. Will tit for tat ever end?
The Chinese aren’t robbing us blind on trade; we get things we need from them at an affordable price. But they are robbing us blind on IP. Two men who know a thing or two about China — retired Navy Adm. Dennis Blair (former director of national intelligence and former commander in chief of the U.S. Pacific Command) and retired Army Gen. Keith Alexander (former commander of the U.S. Cyber Command and a former director of the National Security Agency) call IP theft “the greatest transfer of wealth in history.”
Trump's focus is costly and misguided
To give just a few examples, China has stolen top secret data on submarine warfare (according to The Washington Post), sensitive data on the F-35 Joint Strike Fighter and data from numerous other U.S. weapons systems, undercutting our national security at a time when threats appear to be blossoming worldwide.
Blair and Alexander note that Chinese spies “have gone after private defense contractors and subcontractors, national laboratories, public research universities, think tanks and the American government itself.”
Sorry, but this worries me a lot more than a textile factory shifting production to some sweatshop in Shenzhen.
To his credit, Trump is aware of this. His administration said last fall that Chinese hacking has “increased in frequency and sophistication” and has indicted numerous Chinese hackers, not that they’ll ever set foot in a US. courtroom.
We are in an undeclared war of sorts with China and must harden our defenses fast. The question is just how much can the administration push an aggressive, thieving China while also expecting it to cooperate on issues like North Korea and Iran.
Given these complex and intertwined problems, I'm not sure that the trade deficit and tariff war — which JPMorgan Chase says will cost the average American household $1,000 next year — are the right priorities for the president.
Paul Brandus, founder and White House bureau chief of West Wing Reports, is the author of "Under This Roof: The White House and the Presidency" and is a member of USA TODAY's Board of Contributors. Follow him on Twitter: @WestWingReport