Now, in 2019, the United States has won a worldwide economic victory, soundly defeating our foes in Beijing.
In the 1960s and 70s, we out-produced the stolid, hardworking, habituated Germans. In the 80s and 90s, we out-strategized the planning mavens of Japan despite their discipline and focus.
Now, in the first two decades of this century, we have won the global game of economic chess we have been playing with the ruthless, vicious, tyrannical thugs who run China.
The stakes in our economic competition with Germany and Japan were global bragging rights. But in the contest with China, the freedom of mankind is the issue.
The heavies on China’s politburo had envisioned a different ending to the economic challenge China presented. Their strategy had been to use our own greed and materialism against us by dangling attractive, inexpensive products in front of our consumers with one hand while lending us the money to buy them with the other.
Like any savvy street drug pusher, they knew that we would become addicted and that “Made in China” would soon crowd out “Made in America” on our retails shelves. The idea was to sell to us vastly more than they purchased from us and to finance the difference by lending us back our own money.
The underlying technology and product design would be ours — bought, copied, rented, or stolen by Beijing.
China sought to become our global supplier of products and toys on the one hand and our banker on the other. Then, global hegemony would be within reach. Every year, China sold our consumers $300 billion more than it bought from our producers. The resulting trade deficit reached staggering proportions.
In the two decades since its admission to the World Trade Organization in 2001, China moved steadily toward its objective by illegally manipulating its currency to keep it undervalued (largely by buying our debt). Its products forced ours off the world’s shop floors and retail spaces, and it used its access to its huge domestic market to entice U.S. companies to locate in China.
The price of admission was usually all their technology. What U.S. technology they couldn’t buy, the rulers in Beijing stole by industrial hacking and large scale espionage.
Beijing was confident that the U.S. wouldn’t complain much or else it would face a drawdown of China’s U.S. financial holdings and a cutoff of credit. In its 20 years of massive growth — dating from WTO membership — China became an exporting machine cornering markets throughout the world and racking up a huge trade surplus with greedy, thrifty, pampered U.S. consumers.
China only laughed when attacked by U.S. politicians of either party for currency manipulation, commercial espionage, predatory pricing, and monopolistic trade practices. It knew, or thought it knew, that we had become too reliant on Chinese products to give them up.
Then came Donald Trump. He called China’s bluff and imposed massive tariffs on its exports, brushing off the expected retaliation against our farm products and other exports. With a 3:1 ratio of imports to exports, the Chinese had far more to lose from a tariff war than we did.
Beijing expected American consumers to stagger under the tariffs but few really did. Most just changed their purchasing habits to other stores with goods from other countries or switched to those made at home.
Totally confounding the predictions of their experts, China found itself stagnating economically. It could not replace U.S. markets with domestic outlets. China had bet on exports to grow and never troubled to develop domestic markets despite its gargantuan size. China could never replace our domestic market once tariffs had foreclosed it. The U.S. easily found new suppliers. But China could not find new purchasers as easily.
The U.S. soared to higher GDP levels each quarter. Unemployment became a rarity. U.S. retailers mapped out new sources of supply, and domestic production filled the void.
All the while, China sputtered.
Trump supplied what had been lacking: American will and resolve.
Most likely, Trump will force major concessions from Beijing on the import and export of goods and services. He will likely be able to enforce a crackdown on currency speculation.
Will he also be able to rein in Chinese theft of our intellectual property? The jury is still out. But he clearly has the leverage to do so. And each month’s economic data only strengthens his hand.
Now, sensing Trump’s leverage over Beijing, the pro-democracy demonstrators in Hong Kong can demand what their predecessors in Tiananmen Square could not: Political reform.
Despite this colossal win, our victory over China is far from certain in the long run. Beijing is raising the stakes from the global control of trade to the control our minds. Through expropriation of American breakthroughs in Artificial Intelligence, combined with ruthless experimentation on human subjects, China is seeking to achieve control of the internet and of the human mind along with it. It seeks to enforce global totalitarian rule by capturing our thinking process itself.
The threat is so audacious and blatant as to compel the most aggressive of responses. Our battle over the old issues of trade and finance have left us in a good position to meet this challenge.
But meet it we must.
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