The wrong way to deal with China

Hello, I'm Andy Browne, Editorial Director of the Bloomberg New Economy.  The markets have been far too sanguine about the prospects of a U.S.-China trade deal. At best, an agreement would represent a truce. Now, even that prospect has dimmed as Donald Trump doubles-down on tariffs. In a Bloomberg Opinion piece, I argue that while Trump has good reason to be skeptical about China's willingness to level the playing field, tariffs are the wrong way to get Beijing to behave better. The White House should discard the fantasy that tariffs will produce a quick solution that solves all of its trade frustrations with China. Even if Beijing enshrined in law all the concessions it has made over the past year, as U.S. Trade Representative Robert Lighthizer is demanding, it could still find numerous ways to stymie their implementation. Equally, the U.S. must not assume it will be forever impossible to overturn the most damaging aspects of Chinese mercantilism. Disengaging from China would compound the hurt from tariffs. Instead, Trump should learn from recent Chinese experience. In one case, the Xi administration recalibrated policy when private businesses became so alarmed by the economy's statist turn that they sharply curtailed job-creating investments. Authorities are now showering these companies with tax cuts and other incentives to resume spending.   Likewise, when countries from Pakistan to Malaysia started questioning multi-billion dollar Chinese infrastructure projects under the Belt and Road Initiative, the regime rethought the plan's more controversial aspects, such as contracts exclusively for Chinese companies, and then went a step further. At the second Belt and Road Forum a few weeks ago, Xi promised market opening, protection for intellectual property rights and increased imports, all with Trump's priorities in mind. In both cases, the regime took a challenge seriously when it threatened China's core economic interests. A patient and unified global effort to roll back predatory Chinese practices, including subsidies to state industrial champions and forced technology transfers, would generate this kind of broad-based and overwhelming pressure on the Chinese bureaucracy as a whole. The Trump team must build coalitions of allies determined to win a level playing field in China. This group should blacklist Chinese companies, state or private, that benefit from cybertheft and other abuses, along with their top executives, financiers and advisers. U.S. companies must abandon their reticence to challenge unfair treatment under WTO rules. Reciprocity should be the watchword: Foreign countries should aggressively block Chinese firms from markets that aren't open in China. Like Turning Points? Subscribe to Bloomberg All Access. You'll get our unmatched global news coverage and two premium daily newsletters, The Bloomberg Open and The Bloomberg Close, and much, much more. See our limited-time introductory offer. Want more news about China? Sign up for our new Next China newsletter, a weekly dispatch on where China stands now and where it's going next. Download the Bloomberg app: It's available for iOS and Android. FOLLOW US SEND TO A FRIEND You received this message because you are subscribed to Bloomberg's Turning Points newsletter. Unsubscribe | Bloomberg.com | Contact Us Bloomberg L.P. 731 Lexington, New York, NY, 10022