The US’s trade war fallacy

Even if US corporations returned, the financial costs would be high. Companies would have to rebuild manufacturing facilities, recreate supply networks where local suppliers may no longer exist, and regenerate the community environments to house their workforce.

This would be one of the most ambitious projects the United States has engaged in, something along the mammoth scale of China's Belt and Road Initiative. Extensive city re-planning would be necessary. Infrastructure built. Communities re-nurtured. The US Government would most certainly have to adopt a regime of incentives something akin to what South East Asian Governments are giving investors, something unprecedented in the US. This would most likely need to be accompanied with a tax scheme where companies manufacturing in the US would pay a lower tax than companies importing their products to factor in differential labor costs.

Has the horse already bolted?

This is the reality the United States must now live with. Now the US must learn how to accommodate China diplomatically and economically, completely outside the military paradigm. Unlike the Cold War, which was about military supremacy, this one is about trade. Although there are some real issues like IP that need to be sorted out between China and the US, economic relations with China must be based on the reality of mutual co-existence and avenues of cooperation. This would be a complete reversal in US policy thinking.

However, despite all the US rhetoric, American corporations are still investing in China. In fact, US corporations have gone far beyond just setting up factories to export back to the United States. They are heavily involved in distributing products within China's domestic market, and investing in other sectors like fast food, leisure, and equities. A so-called trade war with a nation that the US have heavy investments in is nonsensical. There is the potential that US firms could be hurt in China. The interdependency between the Chinese and US economies needs to be recognized and reflected in policy.