President Trump’s recent summit with Chinese President Xi Jinping was only modestly successful. The hard reality is that on both security and economic issues, the United States and China are rivals — not partners — and much tougher days lie ahead.
Messrs. Trump and Xi reached no substantive agreement to curb North Korea’s nuclear program and on trade, the two leaders initiated a 100-day review process whose ultimate objective is unclear.
For several decades, China accomplished double-digit growth by exporting consumer goods to western markets while keeping its economy tightly controlled. It imposes high tariffs and administrative barriers to imports, compels western companies to manufacture in China and transfer technology in order to access its markets, aggressively subsidizes domestic firms, and dumps products abroad in industries plagued by excess capacity.
The United States absorbed the brunt of this onslaught. The $310 billion U.S. trade deficit with China has shuttered factories, left millions discouraged and permanently unemployed and imposes slower growth and huge foreign debt.
Manufacturing has been hardest hit and that curtails U.S. investments in new technology — both on the factory floor and in next-generation products such as industrial robots. Without addressing the bilateral trade deficit, Trump cannot deliver 3 percent to 4 percent growth.
As rising wages challenge manufacturers in Chinese coastal cities, the Communist Party must demonstrate it can still deliver significant growth. Beijing is becoming more, not less, protectionist and is targeting high-technology activities that strike at the heart of American prosperity, subsidizing startups and buying western businesses. It is tightening its authoritarian grip through control of the Internet and a social credit rating system that monitors personal activities to allocate access to jobs, housing and the like.
