China and Israel Will Both Lose From Trump's Trade Wars

China's economy is feeling the pinch and Israel will, too, because the global system under assault from the White House has been a boon to Israel

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U.S. President Donald Trump meeting Chinese counterpart Xi Jinping at the G-20 summit in Osaka, June 29, 2019.
U.S. President Donald Trump meeting Chinese counterpart Xi Jinping at the G-20 summit in Osaka, June 29, 2019.Credit: \ Kevin Lamarque/ REUTERS
David Rosenberg
David Rosenberg

Donald Trump's personal behavior is so loathsome that at least some people with a modicum of decency can't help but feel uncomfortable with everything he says and does. His latest tweets suggesting that "progressive" U.S. congresswomen go back to where they came from set a new low even for a president who routinely tests the bottom of political discourse.

That said, Trump seems to have gotten it right on China.

That's not to say that Trump is a deep and strategic thinker, or that the trade war he's waging will end in a decisive victory for the United States. But it's certainly going to leave China worse for wear and undermine its pretensions of global leadership.

>> Read more: U.S. warned Israel over deals with China, top Pentagon official tells Haaretz Israel may live to regret its warming ties with China | Opinion

The latest evidence of that is China's economic growth, which slowed to 6.2% in the second quarter compared with a year earlier. That's still an amazingly fast pace of expansion. But by Chinese standards, it's pretty disappointing – the weakest growth the country has posted in 27 years.

Moreover, most of that growth occurred before the latest Trump tariffs were imposed on imports from China and the collapse of a troubled bank. Baoshang Bank isn't a heavyweight of the Chinese banking world, but its fall does hint at the troubles facing Chinese lenders and the country's huge debt pile. Its woes have taken a toll on consumer and business confidence.

In any case, Chinese GDP statistics aren't considered particularly reliable, less due to official massaging and more because lower-level officials inflate figures to make themselves look good in the eyes of their higher-ups. China's economy by one estimate is 12% smaller than the official statistics say it is.

Even if Trump doesn't open new fronts in the trade war, he has done quite enough with the tariffs and other restrictions he has imposed. The uncertainly he has created with his mercurial policies are doing the rest. Global businesses are already starting to shift their supply chains out of China on the assumption that in the best case, the tariffs will be in place for a long time and in the worst, the United States and China are entering a Cold War.

It's a long process. For America, Trump's fantasy of all this manufacturing returning home is nothing more than a fantasy.

But for China, it's a negative long-term development. Unless China can successfully move up the value chain and become less reliant on being the world's factory floor, it will find it hard to keep up the kind of growth rates the Chinese people have come to expect.

In the United States there are a lot of worrying economic indicators, but for now that's for professional economists to chew over; from the point of view of Trump and his inner circle, important is that the economy keeps generating jobs and wage growth until November 3, 2020.

Chinese leader Xi Jinping doesn't have to worry about the next election – he has signaled he plans to, in effect, be a president for life. But that doesn't give Beijing any political edge over Washington in the trade war.

China has never been democratic enough for political problems to be ironed out through a change in government, grassroots activism or even social media rants. Under Xi, the few places where anger and dissent could let off steam have been shut down. There's no room for reasoned debate or a smooth transition to a new leadership that can address China's problems from a different angle.

Xi has to look strong and uncompromising, or admit he erred in letting China get into the mess it's in, which would lead to concessions. But by being strong and uncompromising, he leaves little latitude for negotiations with the United States. China is in a Xi-imposed pickle.

As for Israel, if Trump's trade war with the Chinese were an isolated policy, Israel could sit aside while the two giants duked it out. But Trump's wars go well beyond China and trade. They're part of a general assault on the global system that enables trade and investment to flow easily across borders. His wars are already having a chilling effect on global trade.

The global system Trump hates has, without a doubt, hurt the many Americans who worked in the industries that got up and moved to China. But for Israel, no less than China, the system has been a boon, in particular for high-tech. Startup Nation would never have come into existence without foreign capital and foreign markets.

Trump and Benjamin Netanyahu are often portrayed as a pair of evil twins. It's a facile comparison. Where Trump operates out of ignorance and prejudice, Netanyahu is a strategic thinker. While Trump feels most home tweeting and working the crowds, Netanyahu prefers the corridors of power and only engages in inflammatory rhetoric when his back is to the wall.

The one thing the two men do share is a dark view of the world and international institutions. For Netanyahu, however, cross-border trade and investment has always been a welcome development, even if he's  suspicious of the very countries he wants Israel to do business with.

Trump's view has the small virtue of being consistent.  But, to paraphrase Emerson, it’s the foolish consistency of little minds, and Israel will, like China, be the worst for wear for it.

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