Trump Is Right: The U.S. Can’t Lose a Trade War

July 8, 2018 Topic: Economics Region: Asia Tags: Trade WartariffsChinaTrumptrade

Trump Is Right: The U.S. Can’t Lose a Trade War

If President Trump is right about one thing, it's that when you have a trade deficit of half a trillion dollars, you can't lose a trade war.

If Trump is smart, he won't use his bargaining leverage just to sell more bourbon and lobster, popular as that might be in Kentucky and Maine. He'll use it to safeguard and expand America's technological lead. Amidst all the talk of American decline, people seem to forget just how much the U.S. leads Europe and Asia in high technology. That's the real foundation of America's future prosperity.

The Trump administration has repeatedly used the authority of the Committee on Foreign Investment in the United States (CFIUS) to block direct Chinese purchases of American technology—and rightly so. In the brewing trade war with China, the administration could go further to rein in illegal Chinese practices like forced technology transfer and outright technology theft .

Trump could also pressure the European Union to roll back harsh data privacy rules that unfairly disadvantage American internet companies. China has a long history of directly blocking American companies from accessing the Chinese internet. Now the European Union seems intent on following China's lead through seemingly even-handed regulations that disproportionately affect foreign firms—nearly all of them American.

American foreign policy has long been dominated by people who seemed to care more about being admired for their good works than about getting the best deal for the American people. That yearning for external validation has clearly been thrown to the wind. But being tough on trade is not enough by itself.

To win a trade war, the Trump team also has to play smart. Given all the weapons in at their disposal and all the advantages on their side, they should be able to win a trade war without a fight, the way Reagan beat the Soviet Union without firing a shot. With Europe in political turmoil and China on the verge of economic meltdown , a burst of presidential bluster might be all it takes for America to win on trade.

Salvatore Babones is an American sociologist and professor at the University of Sydney, Australia. He focuses on China, the global economy, quantitative methodology and the long-term impact of technology. He has written extensively and is the author of The New Authoritarianism: Trump, Populism, and the Tyranny of Experts.

Image: FILE PHOTO: A yuan banknote is displayed next to a U.S. dollar banknote (back) for the photographer at a money changer inside the Taoyuan International Airport March 18, 2010. REUTERS/Nicky Loh/File Photo