Dec 22, 2011

Last week, Donald Trump sent an open letter to Obama, ranting about a new tariff the Chinese government placed on US made autos, and how the Obama administration is allowing China to walk all over it. Trump’s solution was to place an immediate, across the board tariff of 25% on all Chinese made products.

Trump ended his letter with:
“How much more money are you willing to permit China to take from our economy? Isn’t 370 billion dollars a year enough? It’s time to wake up and realize that China is committing economic terrorism against the United States. You are single handedly allowing numerous countries to destroy our great nation and everything that we stand for.” (Read more: http://dailycaller.com/2011/12/17/trumps-letter-to-obama-china-thinks-youre-weak/#ixzz1hCnNSpnb)

While I agree that the tariff China placed on US autos is a problem, Trump is leaving several pieces out of the pie.

China is a our biggest banker. The US owes China more than 1 trillion dollars. One doesn’t go to one’s biggest banker and start making demands. If we want to reclaim our moral authority, the first place the U.S. needs to look is within, which means balancing the federal budget. We’re not going to have much leverage with the Chinese if we continue to borrow billions of dollars from them.

Second, an across the board 25% tariff means all those ipods and gadgets we import from China will go up. It doesnt mean that many of those products will suddenly be made in the US, because our average 20.00 an hour manufacturing wage still won’t compete with China’s of less than 2.00 an hour.

An across the board 25% tariff would also trigger a trade war the likes we haven’t seen in 100 years. History has shown that no one wins in trade wars.

China bashing is a political football that prospective presidential candidates kick around during their campaigns – and drop once the election is over and reality sets in.

The most practical way for the U.S. to handle the problem is to get our own house in order, and then hit the negotiating table once we can bargain from a position of strength.

Anything else is a lot of hot air about slapping the banker.