Why Trump Rebuked Hardliners Who Pushed for More China Decoupling

(Bloomberg) --

The world of business and economics is understandably fixated on the coronavirus outbreak in China and the unfurling impact on supply chains and the global economy. It is already provoking another round of discussion of de-globalization as the trend of the moment. But President Donald Trump offered a tweeted flash at a variation on that theme last week that’s at least worth adding to the conversation.

The fear he expressed, in short and not in his precise words: De-globalization risks turning into de-Americanization.

The Trump tweets in question marked a remarkable public rebuke of hardliners advocating new export controls aimed at halting sales of GE jet engines to China and closing loopholes that have allowed U.S. suppliers to circumvent a Commerce Department ban on sales to China’s Huawei.

Trump tweeted out his objection to those ideas by arguing he didn’t want “to make it impossible to do business with us” because that “will only mean that orders will go to someplace else.” He also aimed a broadside at what he made clear he saw as invocations of national security that were too broad.

That last bit should be remarkable to anyone who has been following Trump’s trade wars closely.

A foundation stone of the administration’s attack on the liberal economic order over the past three years has been its broad interpretation of national security. Senior officials have regularly declared anything related to America’s economic security vital to national security. Even, they have argued, passenger sedans from Europe.

China has also, of course, become a special focus. Most everyone in Washington these days believes a new Cold War is afoot. Think-tank discussions of the looming decoupling of the world’s two largest economies are common. Mainly, it should be said, because plenty of hardliners in Trump’s cabinet have been signaling something like that is coming.

Only, it turns out, the president doesn’t appear to buy into a goal of a decoupling.

Trump has made clear repeatedly over the past three years that he wants to sell more to China not less. There is a reason the aspect he touts most of the “phase one” deal he signed with China in January is the $200 billion Chinese buying spree at its center.

Which brings us to what precipitated his tweeted intervention last week.

Speak to American tech and other executives and they quickly express fears that one result of the Trump administration’s assault on China is that they will be shut out of what remains the world’s most promising market.

The more the U.S. blocks the export of components like semiconductors and jet engines to China and imposes tough sanctions on anyone who violates such bans, the more it will force not just Chinese companies to stop buying American components but those from third countries aiming to sell to China. The emerging reality is that selling to China in the future could mean getting America out of the supply chain.

It’s also a major concern of farm groups and American manufacturers who do a good business in China, and for U.S. academic institutions that have attracted Chinese students.

Which is why some worry that a longer-term de-Americanization has begun and that with the genie already out of the bottle it may be too late to reverse that trend. Trump taking to Twitter to intervene last week may turn out to be an important milestone. It could also simply be a late recognition that trade and technology wars are both hard to win and replete with unintended consequences.

Charting the Trade War

In an effort to appease hurting developers of solar power plants, the Trump administration has also let China’s panel makers easily avoid its punishing tariffs.

Today’s Must Reads

• Supply chains | Chaos reigns from the high seas to the factory floor after key manufacturers in China shut down or ships are held in port because of the coronavirus.
• Brexit breakup | The Confederation of British Industry lays out some potential consequences for Britain when it starts its new economic relationship with the EU in 2021.
• Digital dispute | G-20 finances ministers failed to agree on the issue of a global tech tax, the source of U.S. ire against Europe and a possible trigger for further transatlantic trade fights.
• Meat and greet | The U.S. has reopened its doors to fresh beef from Brazil after a more than two-year ban, in a significant win for President Jair Bolsonaro before meeting with Trump in March.
• Stressing out | World economic officials are realizing the coronavirus isn’t just a short-term threat to global growth — it’s exposing the vulnerabilities of globalization itself.

Economic Analysis

• Ending quarantines | China is gradually getting back to work — but the economy is still far below capacity.
• Germany’s rebound | Business expectations gauge proves better than feared but progress remains slow.

Coming Up

• Feb. 25: CPB World Trade Monitor; Hong Kong trade balance 
• Feb. 28: U.S. advance goods trade balance
• Britain’s departure from the EU on Jan. 31 marked the start of a new and, if anything, more complex phase of the negotiations. Click here for a timeline to the year ahead.

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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