The Grim Logic of Trump’s Trade War With China

A month ago, I declared that President Donald Trump’s trade war against China looked like it might be winding down. I was wrong. Instead of capitulating in exchange for some agricultural purchases and other minor concessions, Trump is doubling down. He’s raising tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent, and imposing new tariffs on almost all of the remaining $325 billion or so. China today said it would retaliate and starting next month would impose tariffs on $60 billion of U.S. goods. This is the biggest trade war in modern American history.

There were several reasons it looked as if Trump might back off. First, it’s very hard to verify whether Chinese theft of intellectual property — one of the biggest and most justified complaints from the U.S. side — is still happening. Even if Chinese companies and the Chinese military were to stop appropriating the fruits of U.S. research and development, they would still be able to make some progress by cleverly reverse-engineering American-made products, raising accusations of continued espionage. A similar enforceability problem applies to Chinese non-tariff trade barriers; for example, Chinese local governments quietly and unofficially helping Chinese companies outcompete American companies in the domestic market. So even if China acceded to U.S. demands, ensuring compliance would be hard. The difficulty of establishing a credible enforcement mechanism is probably a big reason trade talks have broken down.