The Coming China Wars Gets My Trump Ball Rolling
This is not some natural disaster. It is politician-made disaster. It is the consequence of a leadership class that worships globalism over Americanism.
—Candidate Donald J. Trump, Jobs Plan Speech, June 16, 20161
One of the most surreal mornings I ever spent was in early June of 2016. I had taken the eight-minute walk down the hill from my home in Laguna Beach to one of the most beautiful stretches of sand on the planet, Victoria Beach.
This stunning half mile of sandy heaven overlooking the Pacific Ocean was my hallowed ground from where I would launch my paddle board and cruise out among the seals and dolphins. And on a clear day, sometimes I would just sit in the warm sand and gaze at Catalina Island just over thirty miles of cold clear water away.
On this particular day, however, there would be nary a glimpse of Santa Catalina. It was crisp and overcast with the infamous “June Gloom” clouds that afflict Southern California annually. The surreal nature of the morning began when my cell phone rang with a call from Stephen Miller, who had already hooked his rising star to Candidate Trump as his number one (and only) official speechwriter.
For weeks, I had been working unofficially with Stephen on a major policy address Candidate Trump was scheduled to give on June 16 at a steel recycling facility outside of Pittsburgh. Stephen was calling to go over some of the final text of that speech, and as I sat down in the sand hoping that my cell phone reception would hold, the key thing that kept popping into my mind was how close I was to power—yet, in tiny Laguna Beach, so far away.
Parsing the China Price
My journey to Victoria Beach—and eventually to the Trump White House—had begun years earlier in 2003 in an MBA classroom at the University of California-Irvine. It was at UCI where I would spend more than twenty-five years of my professional life teaching macroeconomics and public policy primarily to fully employed MBA students.
These students would dutifully report for their MBA duty on weekends and evenings, and this was a schedule ideally suited to my own sensibilities and biorhythms as it allowed me to get my analytics and writing done in the clear light of day—with more than a few breaks for some sunshine and exercise.
It was in 2003 when I began to notice two peculiar trends begin to emerge. First, a significant number of my fully employed students were losing their jobs. This was particularly strange given the strength of the Orange County job market, perennially one of the most robust and resilient in the country.
The second disturbing trend was that even those students who were employed were no longer getting the same kind of generous tuition support from their corporate employers. This was no small thing as it is at least $100,000 to get that MBA degree.
Clearly, something was afoot—and perhaps very rotten—in the MBA market; and with my curiosity piqued, I set about investigating just what might be going wrong. Very quickly, all roads began leading to Beijing.
What I discovered was a phenomenon known as the “China Price,” which was the ability of Communist Chinese producers to offer products in the global marketplace at prices astonishingly low—often 50 percent below that of competitors and sometimes, equally curiously, at prices well below the cost of production. With the China Price as the tip of their spears, these Chinese Communist producers were grabbing huge chunks of global market share, particularly here in the United States—and thereby beginning to put Americans like my MBA students out of work.
It was no coincidence that the effects of Communist China’s attack on world markets began to surface in 2003. This was shortly after China joined the World Trade Organization in December of 2001.
While I tell that particular “Pirate China joins the WTO” story in great detail in my 2011 Death by China film and companion book, I had as yet, in 2003, not put that particular plot point together. Instead, the prevailing conventional wisdom at the time—and null hypothesis as we say in the trade—was that Communist China’s competitive advantage was derived simply from a seemingly endless source of cheap labor. Skeptic that I was, I thought there might be something else going on.
So it was that I set about analyzing the China Price phenomenon in typical MBA professor fashion. For a full year, I conscripted my cadres of MBA students to do a deep dive on just how the Communist Chinese were winning the global market wars. In the course of that year, over two hundred of my students would be involved in both developing company-specific case studies and doing deep-dive statistical analytics. The result was a seminal “production cost analysis” published in the academic journal China Perspectives.
The top line findings from this seminal study presaged my framing of Communist China’s economic aggression in the White House as China’s “Seven Deadly Mercantilist Sins.” These findings pointedly noted the role of unfair trade practices such as currency manipulation, counterfeiting, and illegal export subsidies in China’s assault on American and global markets.
Here is how I wrote the research up for publication in China Perspectives—and note my ever-so-small “boxers versus briefs” attempt at humor, even in an academic journal. Sometimes, I just can’t help myself:
Chinese manufacturers have the capability to significantly undercut prices offered by foreign competitors over a wide range of products. Today, as a result of the “China price,” China has captured over 70% of the world’s market share for DVDs and toys, more than 50% for bikes, cameras, shoes and telephones, and more than one-third for air conditioners, colour televisions, computer monitors, luggage and microwave ovens. It has also established dominant market positions in everything from furniture, refrigerators and washing machines to jeans and underwear (yes, boxers and briefs).
This article examines the eight major economic drivers of the China price and provides estimates of their relative contributions to China’s manufacturing competitive advantage. Lower labour costs account for 39% of the China price advantage…. The remainder…is driven by elements challenged as unfair trade practices by foreign competitors. These include export subsidies, which account for 17% of the advantage, an undervalued currency (11%), counterfeiting and piracy (9%), and lax environmental and worker health and safety regulatory regimes (5%).2 [emphasis added]
It would be this seminal research that would give rise to my first book and what would turn out eventually to be a Communist China trilogy. These prescient works would include The Coming China Wars (2006), the aforementioned Death By China (2011), and Crouching Tiger: What China’s Militarism Means For The World (2015).
The Coming China Wars would be my first bestseller, and it would lay bare both China’s economic aggression as well as its tendency to sell to the American consumer literally millions of products that could harm or kill you or your pets. More importantly in terms of this opus, it would be The Coming China Wars that would be responsible for me winding up in the Trump White House.
In 2011, Citizen Trump would place The Coming China Wars in his top ten favorite books about China. That kindness would, in turn, catalyze a correspondence between me and the president through his executive assistant Rhona Graff. And when the Boss announced his candidacy for president in 2016, in part on a Tough on China platform, I was all in.
And so it was that I now found myself sitting in the warm sand on Victoria Beach talking to Candidate Trump’s one and only speechwriter about what would become arguably the best speech—at least on economics and trade—of the president’s career.
Pure Deplorables Poetry
The Pittsburgh “Jobs Plan” speech as it was dubbed began like this:
We are thirty miles from Steel City [and] the legacy of Pennsylvania steelworkers lives in the bridges, railways and skyscrapers that make up our great American landscape. But our workers’ loyalty was repaid with betrayal.
Our politicians have aggressively pursued a policy of globalization—moving our jobs, our wealth and our factories to Mexico and overseas. Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache.
When subsidized foreign steel is dumped into our markets, threatening our factories, the politicians do nothing. For years, they watched on the sidelines as our jobs vanished and our communities were plunged into depression-level unemployment. Many of these areas have still never recovered.
Our politicians took away from the people their means of making a living and supporting their families. Skilled craftsmen and tradespeople and factory workers have seen the jobs they loved shipped thousands of miles away. Many Pennsylvania towns once thriving and humming are now in a state of despair.
This wave of globalization has wiped out our middle class. It doesn’t have to be this way. We can turn it all around—and we can turn it around fast.3
At least to my high mind and perhaps low brow tastes, this is pure Deplorables poetry. Note the Make American Great Again or “MAGA” play on words where American steel “make(s) up our great American landscape.” Note, too, the sharp angle of attack on unfair trade with its references to “subsidized foreign steel…dumped into our markets” while the “politicians do nothing.”
This Jobs Plan speech also debuts the enduring blue-collar theme of “American Carnage,” an anti-globalization theme that is as far from Norman Rockwell as Cleveland is from Beijing. Intones Trump, from “thriving and humming” towns, we have descended into a “state of despair” as globalization “has wiped out our middle class.”
Of course, it’s the politicians who are really to blame because they took away our “means of making a living and supporting [our] families.” Promises Candidate Trump: “It doesn’t have to be this way.” “We”—note the “we”!—“We can turn it all around, and we can turn it around fast.”
Abe Lincoln wrote the Gettysburg address in 269 words. Donald Trump’s beautiful introduction to his Jobs Plan speech, which perfectly captures the essence of Trumpism, is but 206 words.
Complain now all you want that Trump is certainly no Abe Lincoln—and I will agree. But this speech was sheer political and policy poetry, and I got to be a part of it sitting in the Southern California sand listening to the good vibrations surf pound the shoreline as I spoke with Stephen Miller on the phone.
Now here is my second favorite part of that speech. It’s barely longer than a haiku. Note its tight cadence:
The inner cities will remain poor.
The factories will remain closed.
The borders will remain open.
The special interests will remain firmly in control.4
That’s as pure a political call to action as it gets. Time for a change. Throw the rascals (and Crooked Hillary) out! She is a puppet of the special interests. I, Donald John Trump, am your MAGA huckleberry.
Next in the speech quickly comes a core Populist Economic Nationalist principle: to make America great again, we must make American manufacturing great again. Says Candidate Trump:
America became the world’s dominant economy by becoming the world’s dominant producer. The wealth this created was shared broadly, creating the biggest middle class the world had ever known.
But then America changed its policy from promoting development in America, to promoting development in other nations. We allowed foreign countries to subsidize their goods, devalue their currencies, violate their agreements, and cheat in every way imaginable.
Trillions of our dollars and millions of our jobs flowed overseas as a result. 5
Again, that’s pure MAGA magic. If you want your blue-collar job and your white picket fence back, then America must once again become the “dominant economy” and “dominant producer.” The only way that happens is if a President Donald Trump cracks down on the unfair trade practices of foreign countries like China that “subsidize their goods, devalue their currencies, violate their agreements, and cheat in every way imaginable.”
Promises Made, Promises (Sort of) Kept
This historic 2016 Jobs Plan speech ends with seven critical promises to the American people, and here, I can say that President Trump at least sort of kept every one of those promises. But that was the problem—and would be part of the strategic failures—in 2020. President Trump only “sort of” kept all of those promises.
Promise #1 was to withdraw the United States from the Trans-Pacific Partnership, the TPP. We did this literally on the first business day in office with me standing to the Boss’s side in the Oval Office, and there is an iconic newswire photo capturing this epic moment in American economic nationalist history.6
What I love about this iconic photo—one of the few pictures that hangs in my new office as I am not a sentimental man—is that it is a study in my own survivability. Little did I know at the time that of the ten senior staff ringed around POTUS at his Resolute Desk, the only two of us in the picture who would survive the entire administration would be me and my fellow Jobs Plan speech writer Stephen Miller. Gone either in the short or long run would be Reince Priebus, Kellyanne Conway, Hope Hicks, Don McGahn, Steve Bannon, Rob Porter, Andrew Bremberg, and Stephanie Grisham.
And by the way, it was a very good thing we withdrew from the TPP because the entire architecture of that job-killing, sovereignty-sapping abomination was designed to ship off our auto and auto parts industries to Vietnam and Japan—all in the hopes of gaining some kind of ill-defined geopolitical advantage over a rising, predatory, and increasingly militaristic Chinese Communist beast.
Beijing’s Ambassador of Sleaze
Promise #2 was to “appoint the toughest and smartest trade negotiators to fight on behalf of American workers.” While I would like to think that I might fit that bill, I can’t think of a single other person in the administration who consistently met that high standard.
Instead, Bad Personnel like Gary Cohn, Larry Kudlow, and Steve Mnuchin fought fiercely on behalf of Wall Street capital. Wilbur Ross was at best an uncertain trumpet. And almost everybody else in the rest of the Trump cabinet as well as our diplomatic corps traveled on the globalist side of the offshoring street—Ag Secretary Sonny Perdue, King Rex at State, and the ambassador to China Terry Branstad were particularly notable disasters.
By the way, there are a lot of examples I could offer to corroborate the claim of POTUS that he is a “genius,” but the appointment of Branstad, a former sleazebag governor from the farm state of Iowa, to be ambassador to Communist China certainly would not be one of them.
Any damn fool knew going into a tough negotiation with China that the one place the ChiComs could, and certainly would, exert maximum political pressure on America would be in our farm states. This is because Communist China buys massive quantities of everything from soybeans, wheat, and sorghum to poultry and beef—and therefore buys considerable political leverage.
As such a damn fool myself, I knew damn well—and POTUS should have too—that as soon as we started applying any kind of tariff pressure, the Beasts of Beijing would slap retaliatory tariffs on American farmers. And they would also screw with our farmers by doing other things like leaving shipments of soybeans and fresh produce like cherries to rot on the docks of Shanghai—a nasty little tactic known in unfair trade circles as a “nontariff barrier.”
So looking at this particular chessboard, the last person you would want to send to Beijing as the ambassador would be someone like Branstad who would always be whining about the pressure on the farmers in his home state—a state, by the way, which is arguably the politically most important of the farm states.
And it wasn’t just whining with Branstad. He was constantly screwing with the cable traffic flow from China and trying to insert himself into the trade negotiations with the Communists in ways that often weakened Ambassador Robert E. Lighthizer’s position as Chief Negotiator.
By the way, the other thing that REALLY pissed me off about Branstad was his Deep Swamp unregistered foreign agent of a son Eric. After briefly working for Secretary Wilbur Ross at the Department of Commerce, this Branstad spawn would set up his own consulting firm to leverage daddy’s position as ambassador and thereby cash in on the China trade. At one point, young Branstad would even play a critical role lobbying POTUS to needlessly pull a critical punch thrown at the scofflaw Chinese spy company ZTE—much more about that later.
A Micromanager Mucks It All Up
Promise #3 to “identify every violation of trade agreements” and “end these abuses” was one of my greatest disappointments as I worked personally on writing the executive order to keep that promise. The order was, in fact, published on April 29, 2017 and directed Secretary of Commerce Wilbur Ross to get the job done.7 At the helm of a hapless bureaucracy he had no real idea how to run, Wilbur instead just fell flat on his face.
I was not surprised in the least. Little in Ross’s extensive Lone Ranger vulturing experience as Wall Street’s “King of Bankruptcy” prepared Wilbur to also be the King of Bureaucracy, and his tendency towards micromanagement made him his own worst enemy.
I remember one time when we had an executive order on what was literally its twentieth and final iteration. After what should have been a simple pro forma approval from someone down the bureaucratic chain at Commerce, I got back handwritten copy edits from Wilbur—that’s right, copy edits—on a smudged copy of the order sent by fax.
My first thought was: “Who uses frigging fax machines anymore?” My second was: “This is crazy. If Wilbur is wasting his time doing stuff like this, just imagine what he is NOT doing.”
The Elmer Fudd of Bankruptcy
The first time I met Wilbur was at Candidate Trump’s suggestion. It was at the 2016 Republican National Convention in Cleveland on July 19, 2016, and it was a fun and very heady time in my life.
At the very last redeye flight minute, I had been dispatched to the convention by the campaign to handle some of the media hits. With all of the hotels fully booked by that point, I grabbed a very cool Airbnb apartment just north of the airport.
The next day, I met Wilbur at noon in a big hallway of one of the convention buildings, and we sat on a bench sans any refreshments and just talked about what we might do together. My first impression of him was that of the old Looney Tunes character Elmer Fudd, albeit with an IQ at least one hundred points higher.
Truth be told here, Wilbur just comes off a bit goofy with that deliberate monotone of his and occasional impish smile that plays so well on business networks like Bloomberg and CNBC but often falls flat when he takes that show on the road to CNN or MSNBC or Fox and Friends.
At any rate, the story Wilbur told me that day was as priceless as it was instructive. In the early 2000s, as the unfair trade practices and massive dumping of countries like Communist China began catching up to the US steel industry with a vengeance and more than thirty US steel companies went bankrupt, in swooped Wilbur the Bankruptcy King to snap up American icons like Bethlehem Steel.8
Wilbur would wind up flipping these companies for a profit in the hundreds of millions of dollars, but not before he personally lobbied President George W. Bush for steel tariffs that would prop up the industry. These Bush tariffs would thereby turn the “distressed assets” he had just acquired into moneymaking machines ripe for a quick sale at a tariff price premium.
Wilbur was quite matter-of-fact about how he had his lobbying way with W. Bush in the Oval; and that is the point here: Wilbur not only saw an opportunity to buy distressed assets at a steep discount; he baldly and boldly manipulated the political process to make sure that the value of those assets would spike even higher than the market might otherwise yield.
The bigger takeaway of this story is this: Wilbur spent his entire life running the corporate equivalent of a small Seal Team that made him rich enough for the Palm Beach life. Yet, when he got to Washington, DC, he was poorly equipped to manage a bureaucracy like the Department of Commerce with its more than forty thousand employees, and our trade policy would suffer mightily.
A NAFTA Tariff Sellout
Promise #4 was to renegotiate NAFTA. Check that box, although it took over three years to close the deal.
To my deepest regret, it would take the gutting of our steel and aluminum tariffs by United States Trade Representative Bob Lighthizer to get the new United States-Mexico-Canada Agreement (USMCA) to the finish line. The primary problem with getting to “yes” on the USMCA was with the hardliner Canadians—their hidden agenda was to keep NAFTA just the way it was because, at least for them, NAFTA was like legalized highway robbery of American auto workers, steel producers, loggers, dairy farmers, and the American economy writ large.
Lighthizer’s sacrifice of the steel and aluminum tariffs to get to a NAFTA “yes” would, however, turn out to be a very bad MAGA trade-off that would inflict great cost and pain in Blue Wall country. It likely cost us swing blue-collar votes in several key battleground states where the alleged Biden victory was very narrow.
Neville Mnuchin Ignores the Chain of Command
Now, if you have read any of my books or research articles on Communist China, you may guess that my biggest disappointment with President Trump’s Jobs Plan list of promises was our failure to follow through in a timely way with Promise #5. This was for the Boss “to instruct my Treasury Secretary to label China a currency manipulator.”
It’s not that the Boss didn’t order Treasury Secretary Steve Mnuchin to do this numerous times. It’s just that Steve always refused. This was a classic example of Mnuchin disobeying the chain of command to advance his own Wall Street agenda.
It would take until August 5, 2019, and at least twenty knock-down, drag-out fights in the Oval between me and the Munchkin for Stevie to finally label China a currency manipulator.9 But even then, it was a case of “so what?” Mnuchin would NEVER use the full powers of the Treasury Department to actually make this designation meaningful.
If, instead, we had immediately labeled China a currency manipulator on that same day in January of 2017 that we had withdrawn from the Trans-Pacific Partnership—and I had written a very clear and crisp executive order instructing Mnuchin to do so—we would have struck right at the heart of one of the worst abuses of Communist China. Moreover, and this kind of subtlety was always lost on both Mnuchin and, later in the administration, Larry Kudlow, designating China a currency manipulator, with all the powers such a designation entailed, would have given us an invaluable bargaining chip for the China trade negotiations.
As for Promises #6 and #7, these laid out our strategy to bring trade cases against China to stop its “unfair subsidy behavior” and “use every lawful presidential power,” including Section 301 of the Trade Act of 1974.
Besides Promise #1, getting out of the Trans-Pacific Partnership, these were the two promises where we really shined. But boy, as I have shown you, did we leave a lot of good things that would have helped us in 2020 both on the table and the cutting room floor. As to why this was so, let’s continue this walk down memory lane as it provides a lot of the appropriate context for our ultimate strategic failures.