Trump’s Trade War with China

History, the saying goes, repeats itself because nobody was listening the first time. The many wonderful history teachers I (like so many others) have had in my life are proof that this is not entirely true. Sadly, however, it does seem to be true for many world leaders, the ones with the power to make and shape the course of history.

The 45th President of the United States, Donald Trump, has never been noted for his ability to listen to anyone who was not a sycophant. I will argue that his trade war with China was not only a demonstration of his characteristically ham-handed policymaking, but also a case study of the maxim that history repeats itself.

Trump’s trade war with China can be considered a latter-day rendition of the original Opium Wars of the mid-nineteenth century, which pitted Great Britain and France against the ancient Qing Dynasty. In both instances, the trouble began with a Western trade deficit.

A trade deficit can be understood as “a negative balance of trade” in which “a country’s imports exceed its exports for a given time period.” By the early 1800s, the prosperous trade flowing between China, Great Britain, and colonial India was favoring the Chinese. British traders were increasingly forced to pay for Chinese goods in precious silver because “British consumers had developed a strong liking for Chinese tea, as well as other goods like porcelain and silk. But Chinese consumers had no similar preference for any goods produced in Britain.” Eventually, somebody at the British East India Company had the bright idea to counter this disadvantage by exporting the opium grown from Indian poppies into China. 

The scheme quickly proved too successful for its own good. Opium addiction spread rapidly, to the alarm of Chinese authorities. Amid eerily familiar debates over how to deter drug abuse, China banned the opium trade in 1800, then in 1813 banned its consumption on pain of increasingly severe punishments, to no avail. By 1839, there were millions of Chinese opium addicts and China’s favorable trade balance was eroding. The time had come for action.

In May 1839, Chinese authorities ordered the British Chief Superintendent of Trade in China, Charles Elliott, to surrender the opium stocks at Canton (Guangzhou) for destruction. The result was the First Opium War, which ended in 1842 with the restoration of the opium trade (euphemized as “free trade”), the annexation of Hong Kong by the British, and the discrediting of the Qing. War broke out again in 1856 after the Chinese dragged their feet implementing the treaty. The Second Opium War ended in 1860 with further Chinese humiliations and the realization that China must rethink its place in the world.

Donald Trump and the Third Opium War (2017-2020)

The ripple effects of that rethinking are still being felt all over the world today. In 1912, the Qing Dynasty came to an end, replaced by the Republic of China. Riven by political rivalries between Nationalists and Communists, the Republic fell victim to the ambitions of Japanese imperialists in the absence of Western interest (distracted by the First World War and the Great Depression). During the Second Sino-Japanese War (1937-45), the competing Chinese factions united against the Japanese…then fell back into civil war.

The Communist victory of 1949 produced the People’s Republic of China. “A priority goal of the communist political system was to raise China to the status of a great power.” Whatever the atrocities of the Mao regime and the ongoing battle for personal and economic liberties, the revolutionaries fulfilled that goal beyond their wildest dreams.

This is why Donald Trump, running for president in 2015-16, could drum up popular support by blaming American joblessness on China. Trade deficits weigh heavily on Trump’s mind, and America’s trade deficit with China stood at around $346 billion in 2016. “Trade wars are good and easy to win,” Trump infamously declared. Like everything he says, it was a dubious claim at best.

Trump’s enmity toward trade deficits extends even to America’s allies. According to Bob Woodward’s book Fear (2018), the only reason NAFTA and America’s free trade agreement with South Korea remain standing is because White House staffer Gary Cohn repeatedly stole the papers announcing Trump’s withdrawal from those agreements off the president’s desk.

Trump’s declaration of a trade war against China came following failed negotiations with Chinese leader Xi Jinping in April 2017. Between July 2018 and August 2019, Trump announced tariff hikes on $550 billion worth of Chinese goods, seeking “to pressure Beijing to implement significant changes to aspects of its economic system that facilitate unfair Chinese trade practices, including forced technology transfer, limited market access, intellectual property theft, and subsidies to state-owned enterprises” while arguing that “unilateral tariffs would shrink the U.S. trade deficit with China and cause companies to bring manufacturing jobs back to the United States.”

To what avail? By September 2019, the trade war had already cost the U.S. economy nearly 300,000 jobs and at least 0.3% of real GDP. Other research suggests U.S. companies lost at least $1.7 trillion in the price of their stocks and that Trump’s tariffs may have cost American companies up to $46 billion by the beginning of 2020. Meanwhile, far from shrinking, the trade deficit grew to a record $419.2 billion in 2018. When a final deal was secured on January 15, 2020, the terms agreed upon by Trump were virtually identical to those he had rejected three years earlier.

Trump, in other words, resoundingly lost the Third Opium War. Attempting to save his own hide in time for the 2020 election, he privately praised Xi Jinping at the Osaka G-20 summit for his program to detain some 1-2 million Uighur Muslims in concentration camps in Xinjiang. According to Jack Hayes, the Chinese regard the Opium Wars as embodying their maxim “if you are ‘backward,’ you will take a beating.” Evidently, between 1860 and 2017, China learned that lesson.

What’s the lesson?

The Nobel Prize-winning economist Joseph E. Stiglitz, in his invaluable book People, Power, and Profits: Progressive Capitalism for an Age of Discontent (2019), describes how “Forty years ago, when China began its transition toward a market economy, no one could have imagined how this impoverished country would in less than half a century have a GDP comparable to that of the US.” (p. 85) Now, with Chinese incomes risen tenfold in forty years and 740 million Chinese raised out of poverty, Stiglitz writes “I often lecture in China, and when I relate the statistics about what has been happening to most Americans other than those at the top, the audiences look at me in disbelief.” (p. 37) 

History is far too complex to be reduced to any simple equation, but Hayes is surely correct to suggest that the Opium Wars catalyzed a determination in the Chinese to modernize; to fortify their economy and their military strength against the encroaching colonialism of Europe and America. China, occupying vast territories with abundant resources and a diverse population bound by the philosophy of Confucianism, has always had the potential to impinge violently on the world stage. The Opium Wars, sparking Chinese nationalism, lit that fuse.

For a complex set of reasons, the Chinese emperors refrained from embracing gunpowder and other technological advances while Europeans were using them to conquer the globe. Having refrained from modernizing until the late nineteenth century, China then lacked political unity until the mid-twentieth century, another vital omission for a nation with world stage ambitions. But the situation is very different now.

What is the moral of this story? Is it a condemnation of colonialism? Or of globalism? Is it simply that history is ultimately circular, and that what goes around comes around? The higher we rise, the further we fall? Certainly, China is rapidly outpacing the United States and Europe in economic growth. Whether this will continue into the foreseeable future is debatable.

I am no bleeding heart, but if I see a clear lesson here, it is that to live by the sword is to die by the sword. War is one of the defining influences in human events. Given human nature, it may never be eradicable. But what has it ever accomplished?

The case of the Opium Wars, including Trump’s trade war, is illustrative. The terms Trump found unacceptable, inciting the trade war, were the same terms he was forced to accept at its end. Both countries suffered in the meantime…for nothing. What better metaphor for war can there be? America had already learned the hard way, in Iraq and Afghanistan, that freedom cannot be imposed by force. A lesson lost, of course, on Donald Trump.

But for those listening to history, maybe it means we could afford to value compromise, cooperation, and diplomacy a little higher than we have in the past.