Trump leaves stage but tune still reverberates

Thus far, the Trump approach has hardly worked. As reported in November 2020, US tariffs may have reduced Chinese imports, yet Chinese exports to developing countries increased with China becoming the biggest trading partner of Association of Southeast Asian Nations while the US dropped to 3^rd behind the European Union.

While higher Chinese domestic costs have seen jobs lost to developing nations, China's share of world exports continues to rise as it moves into the middle of many value chains by producing machinery and medium-tech components which are then often exported to other countries for final assembly.

With the US dollar serving as a safe haven since 2008 (which makes its exports more expensive), there has been little return of manufacturing to the US with a recent survey of American manufacturers in China finding that virtually none are considering relocating back to the US while about one-seventh were considering shifting some production to other low-wage countries.

Despite both US imports and exports experiencing a dramatic decline in 2020 due to covid-19, it is estimated that the US trade deficit in 2020 (goods and services) was still $US678.7 billion ($US310.8 billion with China), higher than the 2019 figure of $576.9 billion (deficit record $763.5 billion in 2006).

Most importantly, US consumers continue to gravitate towards cheaper product choices, often Chinese made, which comprise the biggest component of the US trade deficit at $915.8 billion during 2020 (the highest goods deficit on record).

With most liberal democracies having decent social welfare systems, as democratic policy outcomes are influenced by many legitimate players (political parties and interest groups), their ability to compete with China is swamped by the CCP possessing absolute control to organise its society for the purpose of economic gain however it sees fit.

The CCP's quest to dominate the global economy includes immense subsidies to support for Chinese companies to produce and invest in foreign companies; discriminatory treatment of foreign investment; forced technology transfer where foreign companies In China must enter joint ventures with Chinese firms; the blurring of civilian and military technologies, including facial-recognition software; and the overproduction and the dumping of cheap products on to the global market to gain or increase market share.

But, in a world where resources matter, albeit one where ideas should also matter regarding how the world should best operate amongst competing nations, it will indeed take considerable fortitude for any liberal democracy to support US leadership to take on the CCP given there is a real risk of considerable economic decline in the short-term.

For Australia, as one of the foremost defenders of liberalism, its increasingly open criticism of the CCP has led to one extreme estimate of a potential 6% decline in GDP if an all-out trade war shut down Australia-China trade by 95%, while noting that China accounts for more than a third of Australia's export dollars which pushes up the Australian dollar and makes imported goods much cheaper.

It is also argued that a move towards greater industry and export diversification is necessary to "allow time for capital flows and production and employment to readjust and assume that monetary policy and fiscal balances remain unaltered throughout the world", or else the loss of Chinese exports would reduce "the rate of return on investment in Australia, forcing financial markets to reallocate finance to other parts of the world".

Other liberal democracies are less supportive of the US aggressive approach, as seen by Germany which enjoys one of the largest trade surpluses in the world. During September 2020, while the German Foreign Minister Heiko Maas indicated that Europe would not countenance threats, "no matter what direction", he reaffirmed Germany's position that economic considerations would continue to guide the Sino-German relationship as "a decoupling of the relationship between the EU and China is not in our interest".

As Germany is one of the main contributors to the US trade deficit, albeit that a spokeswoman for Germany's Federal Ministry of the Economy insisted that Berlin's goal to lower the surplus by strengthening consumer demand, Trump during 2018 and 2019 threatened to slap tariffs on foreign automobiles into the US, Germany's most important export item.