Where China Still Has a Hold on Us
For many years now, many Americans have been muttering under our breath, “Why do we buy so much from China?”
Whether we’re at a clothing store, a computer superstore or a big box discounter, the question is the same as we see that label on the box.
The same goes for us in the business world, as we find ourselves forced to buy parts, components, even finished goods made in China, because they just aren’t available anywhere else. Not in the USA, not in Mexico, often nowhere on earth except China. It’s unacceptable, but sometimes, we’re stuck.
So we elected President Trump, and he committed to reducing our tax and regulatory burdens, and to raising tariff barriers on China so that American companies would find it competitive again to make everything here — as we used to.
It’s hard sometimes, but we understand both sides, and we’re living with it.
What we talk about less — because it’s harder, and frankly, because it’s more remote, more hidden — is how all this affects our export market. We may hate buying from China, but we don’t mind selling to China.
Just as China is happy to export to us, we are happy to export to China. We figure we’re finally getting some of our money back, after all. We’ve had this massive trade deficit for all these years, and the only reason it isn’t worse is that we do sell the Chinese a lot of products — mostly raw materials for their manufacturing engine to improve and food for their people to eat.
We ship them soybeans, integrated circuits, petroleum, vehicles, and more. But the one in the news these days is the soybeans.
Soybeans are our number-one export crop to China. In a good year, we sell $18 billion’s worth of them to China alone. That’s over 11% of our total exports to China by value.
The integrated circuits and other tiny electronics that we make here come in second by value, at $9 or $10 billion. We buy them back, later, as computers and cell phones and more. Don’t let anyone tell you the USA can’t make small electronics competitively. China buys ours.
After these heavy hitters, we get to the fuel sector, where our exports of liquid and non-liquid petroleum, pharmaceuticals, and vehicles show up in the statistics before the next food item: corn, at about $5 billion per year.
The problem is — well, actually, there are lots of problems, but this is the first one — the USA is a free economy, whereas China is a command economy. Chairman Xi’s politburo in Beijing can give an order, and China increases or decreases its purchases the next day. In the USA, it’s up to hundreds of corporations, and countless thousands of independent farmers, who await those orders — just as it’s hundreds of corporations and countless thousands of manufacturers and distributors who make the individual choices, item by item, purchase order by purchase order, to buy what China is selling.
So one of the problems with the theory of free trade is that it can’t really exist as long as some countries are free and others are not. Our government can set tariffs, quotas, penalties, and taxes, but our government can’t directly tell American business whether or not to buy or sell anything. By contrast, Chairman Xi can. He can give an order, and it’s done.
That’s one of the things Democrats love about Marxism, after all: The establishment can issue an edict, and it happens. As capitalists, Republicans see the positives and the negatives of such power.
China is ordering less from the USA this year. It’s the price of trying to correct our trade imbalance.
On the macro level, it makes sense, and it’s worth it — the goal of becoming independent of the Chinese market is paramount. But on the micro level, it is painful, as this means countless thousands of American exporters, especially the agricultural ones, are stuck with fewer buyers for their soybeans, corn, and other foodstuffs.
From a public policy standpoint, there are solutions — unpleasant ones, but solutions nevertheless.
Our government can give tax credits and grants to the exporters suffering from this temporary shrinkage of our Chinese customer base. Purists oppose such grants, and with good reason, but it’s not as though it’s without precedent. For generations, our government handed out milk subsidies, cheese subsidies, butter subsidies, honey subsidies. If a farmer produced it, there was a bureaucrat to set a price support for it. The barn door was left open on this issue generations ago.
So that is the solution, and yes, we need to find a reasonable way of doing it this year, to save the producers who’ve had their markets pulled out from under them, in part, through no fault of their own.
But there’s another of those pesky problems: Is it entirely through no fault of their own?
We have long thought of our exporters as the heroes, the ones who get some of our dollars back when they export. To an extent, that is true. But there is still a part of the argument against massive imports from China that applies equally well to the issue of massive exports to China: China is our enemy, in many, many ways.
The Chinese threaten our allies. They cheat our inventors. They fund the terrorists who attack us. They fund the corrupt colleges and charities and organizations that undermine us at home. Just as we should not be rewarding such a country with our purchases, we arguably shouldn’t allow ourselves to be dependent on them for our sales either, should we?
One day — we don’t know when — China will start a war, and we will be on the other side of it. We will rush to the defense and support of Taiwan, Japan, South Korea, the Philippines, Australia, and others (whether they all deserve it or not). We will be there, because China cannot be allowed the world domination it desires.
When that happens, we will immediately lose China as a source, and every American company that depends on China for anything at all — raw materials, technology, components, finished goods — will immediately have to find new vendors.
By the same token, when that war happens — they’re the ones planning to start it, not we, so we have no idea — the exporters who depend on China as a customer will also find themselves, suddenly, without that buyer.
Should they have ever allowed themselves to become so dependent on one single customer, especially an enemy nation as corrupt, communist, and warmongering as China is?
In business school, they teach you to diversify. Don't let your catering or landscaping or laundry business become 100% dependent on this hospital or that corporate headquarters. What if it shuts down or moves? What if you lose the contract? How was this lesson lost on the farmers and agricultural giants who similarly allowed themselves to become dependent on one foreign customer, a nation that murdered a hundred million of its own citizens and constantly threatens its neighbors even today?
In this long, hard trade war, we need to acknowledge certain hard truths. One of them is that, just as we should never have let ourselves get so dependent on one source for our purchases, we should never have let ourselves become so dependent on one destination for our export, sales either.
When we get through this challenging time, we pray that we can settle on a future that makes America more independent of our enemies — in both directions.
John F. Di Leo is a Chicagoland-based international transportation manager, trade compliance trainer, and speaker. Read his book on the surprisingly numerous varieties of vote fraud (The Tales of Little Pavel), his political satires on the Biden-Harris years (Evening Soup with Basement Joe, Volumes I, II, and III), and his recent collection of public policy essays, Current Events and the Issues of Our Age, all available in eBook or paperback, exclusively on Amazon.
Image via Pxfuel.