China will also return the favor -- Beijing has announced plans to target U.S. auto, aircraft, plastics and chemicals sectors -- and “the imposition of tariffs will not solve the underlying Chinese distortive behavior,” warned Linda Menghetti Dempsey, vice president of International Economic Affairs at the National Association of Manufacturers.
Instead of using tariffs, the U.S. could’ve sought to join with the European Union and Japan to bring a case against China at the World Trade Organization. But that’s unlikely after Trump slapped tariffs on EU nations and Japan, while also undermining the WTO. His withdrawal from the 11-nation Trans-Pacific Partnership trade deal removed another key device to alter China’s behavior.
Some prominent academics are calling for more drastic measures to undercut China’s practice of trading market access for technology transfers, such as unwinding Asian supply networks in high-end tech sectors.
Harvard Business School Professor Willy C. Shih favors tax incentives, and even setting up import processing zones in the U.S. to repatriate offshore suppliers for the likes of Intel, Apple and Microsoft. “It would strengthen our ability to sustain the most advanced semiconductor fabs in the United Sates,” Shih said.
In the end, the U.S. and China economic rivalry probably won’t be decided by administrative law judges or trade negotiators, but in the global marketplace. Right now, the U.S. still enjoys a lead in many tech and manufacturing sectors, particularly aerospace and biotech.
Yet the days when China could be dismissed as merely a low-wage assembly center for Western manufacturers are long gone. This is a country on what it views as a historic mission to become a 21st century economic power, and the contest is just beginning.
— With assistance by Lee J Miller