On trade, Biden must remain tough with Xi Jinping

Every American president in the globalized era has mismanaged the relationship with China. To his credit, President Biden has proven more adept than his predecessors at handling it, but he will have his hands full when he meets Xi Jinping today in San Francisco.

Chinese leaders have been adroit at extracting economic concessions from the United States in exchange for commitments that are usually restatements of prior agreements and seldom honored. Wildly uneven bilateral trade with China first hit American workers in the 2000s in the form of massive job losses. It then hit American consumers during and after the Covid-19 pandemic in the form of shortages and dependencies. Now, as China aligns with Russia and grows increasingly bellicose toward its Asian neighbors, it fuels the hit on American national security interests.

We shouldn’t expect Biden to turn all this around in one meeting. However, we should expect he won’t revert to the theater of unaccountability and handshakes that described U.S.-China relations for so long. The interests of American workers, consumers and security aren’t served by offering China’s leadership an open hand when it comes to trade.

In retrospect, normalizing trade with China was a destabilizing event in this country. American corporations rushed overseas to sell to Chinese consumers and took with them their manufacturing to take advantage of the huge and impoverished Chinese workforce. American factory workers saw their jobs leave for Asia, and more were laid off in the resulting flood of Chinese imports. U.S. manufacturing employment, a middle-class bulwark for Americans holding less than a four-year degree, was reduced by nearly 6 million over the next decade. California alone lost more than 650,000 jobs from 2001 to 2018. Addiction and mortality rates increased.

American shoppers, meanwhile, benefitted from cheaper prices at big box stores stocked with imports. But those price reductions evaporated years before the pandemic revealed that many crucial material goods – be it personal protective equipment for health workers or building materials for home construction – simply aren’t made here anymore.

This black swan event brought reality into relief: The United States has deindustrialized to a point where many supply chains were subject to grinding international bottlenecks.

Overreliance on Chinese trade has a lot of responsibility for that.

Bill Clinton argued “the more China liberalizes its economy, the more fully it will liberate the potential of its people” to persuade Congress to normalize trade ties. George Bush was both too permissive and too disengaged. Barack Obama thought dialogue would bring about true market and political liberalization. Donald Trump, acting unilaterally, thought tariffs and browbeating Chinese leadership would close those trade deficits and reshore U.S. manufacturing capacity. None of it worked.

President Biden has maintained virtually all of Trump’s tariffs. He’s also enacted federal investments that create not only domestic manufacturing capacity but demand for it as well. He’s checked outbound investment in Chinese companies and erected export controls on technologies like semiconductor manufacturing equipment critical to industrial advancement and military platforms. He’s shown a willingness to work with allies against unfair Chinese trade. Consider, for example, the ongoing negotiations between the U.S. and European Union to create a clean steel bloc.