Gordon Chang: ‘China Can Huff and Puff,’ But U.S. Holds ‘Almost All the Cards’ in Trade Fight

U.S. President Donald Trump gestures to his delegation next to and Chinese President Xi Jinping during a business event at the Great Hall of the People in Beijing, Thursday, Nov. 9, 2017. Trump is on a five-country trip through Asia traveling to Japan, South Korea, China, Vietnam and the Philippines. …
AP Photo/Andy Wong

The United States has “enormous leverage” over China that can be used to bend the Chinese government’s trade policies, Gordon Chang, an expert on China and columnist at The Daily Beast, said on Monday’s edition of Breitbart News Tonight in an interview with co-hosts Rebecca Mansour and Joel Pollak.

Chang framed China’s trade policies as designed to harm America’s economy. “In terms of trade war, China for decades has been trying to undermine the American economy. Whether we call it a ‘trade war’ or whether we call it just ‘trade friction,’ Beijing has been trying with predatory means, and especially with a much more mercantilist attitude, to game the system.”


“I don’t think we have to worry too much about Beijing, and the reason is that we are the trade deficit country when it comes to China,” assessed Chang. “Last year, 88.8 percent of China’s overall merchandise trade surplus related to sales to the U.S., which means there’s tremendous leverage that we have because they need access to our market. We don’t need them nearly as much as they need us. Also, we’ve got a much larger economy; over $19 trillion. They say their economy’s over $12 trillion, but it could very well be less, and we’ve got a stable economy, and they’ve got a fragile one heading towards a debt crisis. You put that all together, and it gives the United States enormous leverage, and President Trump, unlike his predecessors, understands the American power that we have and the imbalance in power between China and the United States.”

Mansour asked Chang about China’s moves to target parts of President Donald Trump’s political support base — including pork and fruit farmers — to politically damage the president. “I think it was calculated on China’s part to go after part of President Trump’s base,” replied Chang.

Chang appraised China’s ability to economically damage American farmers as limited, given the power of global markets for such commodities. “[China] can put tariffs on our goods, but they really need them because they need good quality food. But also, even if they were able to shut us out of their market, it means that China would have to buy this stuff from somebody else. … So if China were not to buy U.S. soybeans, they’d probably buy them from Brazil. That means American producers would sell to Brazil’s traditional customers because there are only so many soybeans that Brazil has at the moment. So, basically, there would be a changing of customer lists, but there probably wouldn’t be that much in the way of real long-term damage to the American economy. So China can huff and puff, but when you look at the way global markets work, we probably are not going to be hurt nearly as much as people think.”

Mansour also asked Chang about China’s intentions to displace the U.S. dollar as the world’s dominant reserve currency. Chang explained structural economic obstacles impeding China’s ambition to elevate its currency’s global status as a reserve currency.

“The Chinese certainly want to dethrone the U.S. dollar as the world’s reserve currency,” Chang stated. “There’s no question about that. They have not been making as much progress as we would’ve thought they would. In matter of fact, in a number of recent years, the usage of the renminbi has actually declined [and] not increased. I think that they will be able to make some progress if they can start paying for oil in their own currency because they are the world’s largest importer of oil, and that’s not a sign of strength. … That’s a sign of weakness. The issue is not going to be what China wants, but the question of whether the market will accept the renminbi.”

Elaborating, he said, “In the past, people have not wanted to hold Chinese currency for a whole slew of reasons. One of them is not trusting Beijing to deal with the currency fairly. Also, because Beijing runs these enormous trade surpluses against the rest of the world, there’s just not that much renminbi out there, and when you don’t have much renminbi out there, it’s just not going to be accepted as a currency. One of the things that’s occurred is the U.S. has been willing to use its market in order to encourage prosperity elsewhere. That means there are a lot of dollars outside the U.S., which means that people can actually use the dollar and the market as liquid. For the renminbi, that’s not the case because China has been running these trade surpluses, which means that they’ve got other people’s currency. Other people don’t have their currency.”

Mansour requested Chang’s comment on the re-entry of China’s Tiangong-1 space station into Earth’s atmosphere, placing Michigan on alert. China’s unwillingness to initially acknowledge the loss of Tiangong-1 and “[coordinate] with the rest of the world in the way that they should have,” Chang said, illustrated the one-party state’s irresponsibility. “It was their piece of space junk. It was falling back to Earth. People could’ve been hurt, and they should’ve been more responsible in the way that they dealt with us.”

“[China] is just a country that just does not care about others,” deduced Chang. “They believe that they can do whatever they want and that there’s no cost for it. The United States needs to impose costs on China, really, for irresponsible dangerous behavior.”

Chang described decades of American policy towards China as impotent, with the Chinese state becoming emboldened via years of Western complacency towards it. He drew on Nazi Germany and Adolf Hitler’s growing belligerence towards a passive Britain and China in the lead-up to World War II as a historical analog to China’s contemporary approach towards the U.S.

“China has been doing  a number of dangerous things over a course of decades,” explained Chang. “When you’ve had Republicans and Democrats, liberals and conservatives holding the White House, and we’ve warned China so many different times on so many different issues, but we have never actually imposed those consequences, and so we have the Chinese to ignore what we say. We have seen this in prior periods of history, where the West has refused to actually impose those costs on, for instance, the Third Reich. When you look at the 1930s, where you have a series of warnings from London and Paris to Berlin, and Hitler just looks at that and says, ‘Well, you didn’t do anything when we re-militarized the Rhineland in 1936. You didn’t do anything when we took over Austria in 1938. You didn’t do anything in 1939 when we grabbed Czechoslovakia in violation of the Munich Pact.’ So when Britain and France told Hitler in the summer of 1939 that they would declare war if Hitler actually moved against Poland, the Germans didn’t believe them, and I can understand why the Germans didn’t believe London and Paris, and so we have World War II as a consequence. Well, we have the same dynamic, right now, but instead of London and Paris issuing these silly warnings, it’s the United States, and we are in a situation where Beijing doesn’t believe us anymore. It’s going to take us a long time to teach the Chinese that we’re actually serious, and the consequences could be severe. I don’t think they’ll be 1930s severe, but, nonetheless, we have taught the Chinese to ignore everything we have told them.”

Gordon appraised China’s foreign policy calculus as banking on a lack of American political will to challenge Chinese trade policies. He characterized Trump as unlike former presidents, given Trump’s understanding of and willing to flex American power.

“When we look at this and understand that they will be able to impose some political costs on President Trump, what they are targeting on is that the United States, at the end of the day, won’t have political will, even though we hold almost all the high cards,” remarked Chang. “I think that they’re making a mistake because we now have a president who has the understanding that the United States does hold the high cards and who shows flashes of political will. China cannot stand a prolonged trade war with the United States, so for them to do this, they are risking not only their economy and financial system, but they’re also risking their political system because their political system is fragile, and it depends upon the continual delivery of prosperity. Although they can wreak havoc on fruit producers or whatever, Trump can turn around and wreak havoc on them. I think they need to understand that they’ve got a lot more to lose than we do. … We’re the trade deficit country, trade deficit countries generally do pretty well in trade wars.”

Chang pointed to Chinese emigrants and their foreign investments as evidence of popular Chinese fears over China’s increasing totalitarianism under the rule of Chinese President Xi Jinping.

“The Chinese economy, right now, is held together by confidence among the Chinese people that their government can keep it together,” Chang said. “But, given the chance, most Chinese would put their money offshore because they’re concerned not only about the way the Chinese economy is going, but the way the Chinese political system is, because there is deep worry about what Xi Jinping, the ruler, is trying to do in moving the Chinese political system back to the 1950s. [Chinese immigrants] live here because they’re concerned about what’s happening in their own country. Now, I’m particularly sensitive about this because my dad fled China in the 1940s, so it seems to me that what we’re seeing again is this deep loss of confidence in China. So President Trump can, by doing a few things, trigger a further loss of confidence on the part of the Chinese in their own country.”

“It seems like they have much more to lose in this than we do if we have the political will at home,” commented Mansour. “I guess the question is, of course, as always, do we have the political will? I think President Trump does, but we shall see.”

“President Trump has come back with a vengeance,” responded Chang. “He’s done a number of things that have directly harmed Chinese interests. … There will be political will on the part of the president, and this will be very welcome because we’ve had policies over the last four decades that have not served either the United States, our allies, our partners, or the international system.”

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Follow Robert Kraychik on Twitter @rkraychik.


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