China held military drills on July 15 off the coast of Taiwan to demonstrate its authority over the region. Only a few days before that, the Chinese government threatened to impose sanctions on any American company that dared to sell weapons to Taiwan.
It’s clear that China is marking its territory and declaring its dominance over its opponents — a mentality reflective of a grade-school bully.
For too long, China has filled the role of the world’s playground bully. Instead of stealing lunch money, China steals intellectual property. And where bullies cripple self-esteem, China undermines global competition by ruthlessly driving down prices.
Beijing simply doesn’t play by the rules, and it continues to flout trade regulations to gain an advantage over competitors. Something needs to be done.
America must handle China like any other bully — by fighting back.
Over the years, Washington wrongly believed that engagement with China would lead to cooperation, a more open economy, and political liberalization. Those inside the Beltway argued that imposing tariffs to stop trade cheating and IP theft would only exacerbate the situation, and lead to a trade war. The right thing to do, they claimed, was to hold multilateral negotiations in five-star hotels.
Eventually, China would appreciate the value of free and honest trade — and would change its ways.
But that never happened.
Anyone who has dealt with a playground bully will tell you that inaction is the worst response. A lack of action simply encourages further abuse. That’s because bullies speak the language of power, not morality. And passivity merely enables future exploitation.
Unfortunately, this is precisely the approach the United States has taken in dealing with China. But a stoic adherence to free trade has done nothing to discourage China’s continuing market manipulations. Look no further than the global steel trade. The United States has failed to adequately push back against unfair trade practices, and that has emboldened China’s wider aims.
Within the last few years, China has consolidated its hold over the U.S. steel market. And China’s state-owned steel companies have stolen the trade secrets of U.S. steel producers — part of a broader campaign of IP theft that the Commission on the Theft of American Intellectual Property estimates is costing U.S. companies as much as $600 billion annually.
China’s heavily subsidized steel companies also dump cheap steel in the global market, further harming America’s domestic producers.
This aggressiveness has become particularly pronounced in the market for steel couplings — the specialized, critically important joints that hold together pipes and other infrastructure. China has flooded the United States with these couplings; they’re subsidized to such a degree that America’s manufacturers can no longer compete in their home market. The domestic steel coupling industry has been reduced to operating at less than 50 percent capacity, with thousands of good-paying U.S. jobs being lost.
The United States simply cannot let this type of economic bullying go unanswered. However, President Donald Trump’s recent actions have provided an opportunity to finally stand up to Beijing.
The president has taken strong retaliatory action against China by imposing 25 percent tariffs on most steel imports. This gives breathing room to America’s domestic steel producers as they play by the rules of global trade. It’s is a sensible course of action — but more needs to be done since China continues to supply steel for “downstream” products, like joint couplings.
With Beijing’s use of any means necessary to maintain an advantage, it’s time to widen the use of tariffs. Steel couplings are an obvious starting point.
In response to President Trump’s tariffs, China is also routing its steel exports through countries like India and South Korea. That allows Chinese manufacturers to dodge the tariffs and maintain an unfair pricing advantage. Consequently, America’s importation of Chinese steel from India and South Korea has increased by 300 percent since 2016.
And China’s production of steel couplings, for example, isn’t covered by the tariffs.
With Beijing’s use of any means necessary to maintain an advantage, it’s time to widen the use of tariffs. Steel couplings are an obvious starting point. But Beijing is massively subsiding numerous industrial sectors, and an across-the-board, 25-percent tariff on China’s industrialized exports could greatly improve America’s manufacturing competitiveness. The Coalition for a Prosperous America (CPA) has studied such an approach and found that a 25 percent tariff on imports from China would boost U.S. GDP by $125 billion while adding roughly 721,000 middle-class jobs over five years.
It’s high time for America to stand up to China’s bullying tactics. The United States should increase its tariffs on China and expand them to cover all exports, including the steel couplings China is producing to evade current trade remedies. Expanding the existing duties will help to level the playing field, grow America’s industrial economy, and deter future aggression.
In order to preserve America’s industrial strength, it’s necessary to fight back. And Washington has an opportunity to step up.
Imposing tariffs on all Chinese imports will show Beijing that its behavior is not acceptable — that there will indeed be consequences. This is the necessary response to a longtime playground bully.
Michael Stumo is CEO of the Coalition for a Prosperous America (CPA), a nonprofit group working at the intersection of trade, jobs, tax and economic growth.
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