Perhaps we are witnessing 10-D chess, played by a maestro. Or maybe this is exactly what it looks like: a total shambles.
The Trump administration is quite right to focus attention on the danger posed by China, arguably a more formidable opponent than the Soviets, although it is quite wrong to exaggerate the extent to which dealing with China can be detached from confronting the threat from today’s Russia.
In the most recent Capital Letter, I quoted a tweet by Secretary of State Marco Rubio:
It’s not that complicated: China threatens our security and prosperity. At today’s meeting with the Indo-Pacific partners, we agreed the region needs to be free from China’s coercive and unfair trade policies. Our security depends on it.
Rubio is correct, but as I observed:
Heavy increases in the tariffs payable by Vietnam (to 46 percent), Indonesia (32 percent), and other lower income countries nearby are not an obvious way of achieving that goal. To be sure, they can be used as a conduit for Chinese goods, and are themselves sources of cheap products, but a subtler approach is needed unless, of course, the administration’s economic fantasies weigh more heavily than geopolitical reality.
I listed a few other tariffs that the U.S. is proposing to impose in the region here.
Vietnam has long had a tricky relationship with China. That ought to give the U.S. something to work with, unless by “U.S.,” we are referring to White House trade adviser Peter Navarro.
Peter Navarro said Monday that an offer by Vietnam to eliminate tariffs on U.S. imports would not be enough for the administration to lift its new levies announced last week.
Oh.
CNBC:
“Let’s take Vietnam. When they come to us and say ‘we’ll go to zero tariffs,’ that means nothing to us because it’s the nontariff cheating that matters,” Navarro said on CNBC’s “Squawk Box.”
The examples of “nontariff ‘cheating’” cited by Navarro included Chinese products being routed through Vietnam, intellectual property theft, and Vietnam’s value-added tax.
If the administration’s idea is to rein in U.S. trade with China (without question, a good idea in some areas), then requiring Hanoi to limit the extent to which Beijing uses Vietnam as a conduit for its exports to the U.S. makes sense. And it’s hard to argue against the U.S. trying to persuade Vietnam to act more effectively against intellectual property theft. Good faith negotiations should be able to ameliorate both these problems by enough to justify the economic and geopolitical advantages to the U.S. of dropping penal tariffs on Vietnam.
But will the U.S. be negotiating in good faith? Navarro’s absurd insistence that value-added tax (VAT) is a tariff would suggest not. I wonder what he thinks about the sales taxes charged in many U.S. states.
The unfortunate reality is that, trapped in zero-sum paranoia, Navarro just doesn’t seem to like international trade that much. The negotiations he envisages seem to involve treating Vietnam like Sisyphus in the underworld, sentenced by irate gods to push a great boulder up to the top of a hill, only for the boulder to roll back down just before it got there, a punishment that was set to last for eternity.
That’s not the type of negotiation that is likely to appeal to the Vietnamese.
And so the way in which China’s Xi has just been greeted in Vietnam, the first stop in a southeast Asian tour China’s dictator began on Monday, seems a little . . . ominous.
“There are no winners in a trade war, or a tariff war,” Xi wrote in an editorial jointly published in Vietnamese and Chinese official media. “Our two countries should resolutely safeguard the multilateral trading system, stable global industrial and supply chains, and open and cooperative international environment.”
Xi’s visit lets China show Southeast Asia it is a “responsible superpower in the way that contrasts with the way the U.S. under President Donald Trump presents to the whole world,” said Nguyen Khac Giang, a visiting fellow at Singapore’s ISEAS–Yusof Ishak Institute…
Talking to reporters in the Oval Office, Trump said China and Vietnam were trying “to figure out how do we screw the United States of America.”
Well, America’s contest with China is what it is (although on the trade front, the U.S. could be handling it a lot more smartly: For now, a scalpel is needed, not a chainsaw), but Vietnam is hardly likely to be sympathetic to Trump’s complaint that Hanoi is working out how to “screw” the U.S. when it contemplates (a) the possibility of a 46 percent tariff after the “pause” expires and (b) the fact that its offer of zero tariffs doesn’t seem to count for much.
AP:
Xi was greeted on the tarmac by Vietnam’s President Luong Cuong at the start of his two-day visit, a mark of honor not often given to visitors, said Nguyen Thanh Trung, a professor of Vietnamese studies at Fulbright University Vietnam. Students of a drum art group performed as women waved the red and yellow Chinese and Communist Party flags. . . .
[Xi] also met with Vietnam’s Prime Minister Pham Minh Chinh. The two sides signed a series of memorandums in areas including strengthening cooperation in supply chains, railroad development and environmental protection, according to Associated Press footage of the signed documents.
Nhan Dan, the official mouthpiece of Vietnam’s Communist Party, said that China and Vietnam will speed up a $8 billion railway project connecting the two countries in a deal that was approved in February.
After Vietnam, Xi went on to Malaysia (facing a 24 percent tariff), and has now arrived in Cambodia (49 percent) — a country much closer politically to China than Vietnam, but which exports a lot of clothing and footwear to the U.S. A 49 percent tariff is unlikely to do much to encourage Phnom Penh to put a little distance between itself and Beijing.
The existing tariff increases are already beginning to hit the U.S. economy, but if they are supplemented by tariffs anywhere close to those that are now paused, the (self-inflicted) economic damage to the U.S. will be compounded by massive (self-inflicted) harm to this country’s geopolitical interests, not least when it comes to blunting the threat from China, something that this administration has rightly made a priority.
Perhaps we are witnessing 10-D chess, played by a maestro. Or maybe this is exactly what it looks like: a total shambles. I know what I think (and I can guess what Xi thinks), but time will tell, I suppose.