When former President Donald Trump began his trade war with China in 2018, imposing tariffs as high as 25 percent on about three-quarters of all Chinese imports, he had three goals: Slash the trade deficit, which is his measure of economic success, bring back jobs to the United States and pressure China to stop ripping off U.S. intellectual property.
On all those scores, the trade war flopped. Although the trade deficit with China initially shrank, it grew during the pandemic, as did the total trade deficit. A pickup in manufacturing jobs stalled in 2019 as higher tariffs kicked in. And the U.S. Trade Representative complained this year that Chinese firms continue to steal U.S. trade secrets “with impunity.”
The best Mr. Trump could say is that China suffered more than the United States because it’s more dependent on trade. U.S. imports of Chinese semiconductors, furniture and other goods facing tariffs fell, and industrial areas in China making tariffed goods showed signs of a slowdown.
The trade war’s only real winners were countries where Chinese firms shifted production to avoid U.S. levies, particularly Vietnam. Between 2018 and 2022, Chinese investment in Vietnam roughly doubled and its exports to Vietnam rose 75 percent, to $147 billion, according to the consulting firm Kearney. During that same period U.S. imports from Vietnam nearly tripled, to $136 billion, as Chinese firms used the country as a toll-free highway to the American market. This shift, which the economists Davin Chor and Laura Alfaro call the “great reallocation,” still leaves the United States dependent on China.
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SKIP ADVERTISEMENTIf the next administration wants to buck this losing streak, it will have to rethink how it designs tariffs. And to deliver the greatest benefit to the U.S. economy it should move beyond the single-minded framework, embraced by both parties, of blocking investment from China and instead encourage the country’s technology leaders to set up operations in the United States, the way Japanese carmakers built American factories in the 1980s.
Sign up for the Opinion Today newsletter Get expert analysis of the news and a guide to the big ideas shaping the world every weekday morning. Get it sent to your inbox.While Mr. Trump has said he wants to boost foreign investment, he has been silent on a role for China. Instead he is doubling down on his old strategy, promising tariffs of 60 percent or more on China and 10 percent or 20 percent on the rest of U.S. trading partners. Those numbers may change — Mr. Trump regularly tosses out different figures — but his goal is clear: “a ring around the collar” of the U.S. economy.
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