About the only person Donald Trump hasn’t insulted in his march toward the Republican nomination is Ronald Reagan. But he’d surely find fault with Reagan on the subject of trade deficits.
Our 40th president said they are not necessarily a bad thing. Trade deficits show, Reagan said, that the U.S. economy is strong, and that the American people have money to spend. Trump, by contrast, calls them terrible and a sign that we’re “losing.” Countries that have trade surpluses with us are ripping us off at every turn, in his view.
Trump's No. 1 culprit is China. The way he talks, you’d think the Chinese are 10 feet tall and much more clever than we are. But his premise is wrong. The U.S. has far better long-term economic prospects than China, which means President Obama will be in a position of strength when he meets Thursday with President Xi Jinping.
No one denies that China has been cheating when it comes to trade. The World Trade Organization has sided with the United States in at least three major cases in recent years, cases in which Washington accused Beijing of employing illegal trade tactics. No less a free trader than Obama himself has slapped anti-dumping tariffs on Chinese goods to protect American jobs. Our trade deficit with the People’s Republic last year hit a record $366 billion — a cool $1 billion a day.
Even so, that’s well below Trump’s exaggerated figure of “over $500 billion,” and in any case it's not evidence that China is “winning,” as Trump likes to say.
If China is really winning, then why have global business executives said the USA is the best place in the world in which to invest and do business? The AT Kearney Foreign Direct Investment Confidence survey says America “takes first place for the third straight year, as it leads all countries in terms of macroeconomic outlook. Forty-six percent say they are more optimistic about the U.S. economy's outlook than they were a year ago, and only 10% say they are more pessimistic.” Executives were less cheerful about China.
If China is winning, then why do more U.S. manufacturing executives say that from now until 2020, they are more likely to add factory capacity here than in China? And why do increasing numbers of them say they are now bringing jobs back?
And if China’s winning, then why are the wealthiest and savviest Chinese bailing on their own country? The Bank of China and Hurun (a marketing group that tracks wealthy Chinese) said in 2013 that more than half of China’s millionaires want to leave or have taken steps to do so. Other studies say they’ve already moved $658 billion out, a figure that could double by the end of this year. When your best and brightest are racing for the exits, is that, to use Trump’s binary way of thinking, winning or losing?
Let’s follow the money in another way that also undercuts Trump’s economic patriotism. China is pouring investment capital into the USA: nearly $16 billion last year, up 30% from 2014. The Rhodium Group, which tracks all this, says close to $2 billion was for “greenfield” projects: brand new manufacturing facilities built from scratch.
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China is attracted to the U.S. for all the right reasons: a skilled labor force, low cost of energy, minimal bureaucracy (if you disagree with this, you’ve never been to China), property rights and contract enforcement. The fact is, for an increasing number of Chinese investors, Adam Smith and John Locke “trump” Karl Marx.
Why does Trump think China is so smart and we’re so dumb? I say the opposite is true. China has an environmental crisis on its hands, and its economy is slowing rapidly. As its wages rise, millions of manufacturing jobs are leaving, as other countries do to it what it did to us. Beijing’s communist bosses are so afraid of their own citizens that they employ a cyber army of 2 million to block social media and crimp the free exchange of threatening ideas. This is not the sign of a confident government embracing the future; it's a sign of a fearful one.
Trump’s read on China is based on a simplistic emphasis on its strengths that ignores its many weaknesses. You know when China will worry me? When it stops investing in America. It’s great that foreigners have confidence in us — more, it seems, than do some of our own would-be leaders.
Paul Brandus, the founder and White House bureau chief of West Wing Reports, is the author of Under This Roof: The White House and the Presidency. Follow him on Twitter @WestWingReport.