There’s been a lot going on with U.S.-China relations during the Trump presidency. In the last few months, protests in Hong Kong have sparked global debate about the role of the United States in Chinese politics. American companies have been facing backlash from the Chinese government for speaking out about the situation in Hong Kong. It seems that Xi Jinping has been trying to exert more control over these companies and get a grip on the U.S. economy. This is nothing new. China has been steadily gaining more power over the U.S. economy in recent decades and has fed the fire in the free trade vs. fair trade debate that has been dominating international relations since the middle of the 20th century.
Several years ago, the Chinese government made a conscious decision to disrupt the steel market in the United States. While it may seem like a small thing, many industries rely on steel. For example, the automotive, machinery, HVAC, and construction industries all require millions of tons of steel each year. Much of that used to be produced in the United States, because the cost of manufacturing and shipping from abroad was comparable to American prices. That is, until China hatched a plan to undercut the American market.
China began subsidizing their own steel manufacturers to sell to companies in the United States at a significantly lower price than U.S. domestic manufacturers could offer. By artificially reducing the consumer prices of essential metal, China was able to ensure that American industries used their steel, rather than buying domestic products. This has inevitably led to U.S. steel plants being closed and increasing American reliance upon Chinese manufacturers. In the long run, this could bankrupt the American steel industry and allow Chinese companies to substantially increase the cost of their steel without retribution.
That’s where Trump’s tariffs came in. The tariffs were set to artificially inflate the cost of imported Chinese steel back to a “fair market” value. This took away the edge from Chinese companies in the U.S. market and kept American steel plants in business. Of course, China didn’t take this well. They want political and economic power, and the Trump administration has not been cooperating. This has caused tensions to rise between the two countries, but Trump has made it clear that he’s not going to let China undercut American companies during his presidency. That is the bedrock of his “America First” policy.
In order to have a shot in the 2020 election, Trump has to focus on the economy. This could be another weapon in his arsenal for him to persuade Midwestern and Rust Belt voters to give him another four years.