Tariffs Boost China's Image, But the US Has No Substitute, Says APARC Scholar Thomas Fingar
This interview first appeared in the Brazilian newspaper Folha de S.Paolo, on April 6. The following English version was generated using machine translation and subsequently edited for accuracy and clarity.
WASHINGTON — The tariff hike against all countries announced last week by President Donald Trump may bolster China's image, but that doesn't mean China or any other country is poised to replace the United States, says Thomas Fingar, Shorenstein APARC Fellow at the Freeman Spogli Institute at Stanford University.
Fingar, a former chief of the State Department's China Division, among other roles in the U.S. Foreign Service and national intelligence, believes that Trump's tariffs will be bad for all nations.
"I hesitate to predict how other countries will react, except that this has more or less given everyone an incentive to bypass the U.S.," he tells Folha.
Donald Trump announced tariffs this week against virtually every country. China has already announced retaliation, imposing a 34% tariff on American products. Are we facing a trade war?
I don't think the war metaphor works for me. I don't know what Trump is trying to do. One could say that this is a game of imposing an outrageous tariff in the hope that specific targets, which are basically all countries, might give in to what they say are their demands. In doing so, they would reduce barriers to trade with the United States. To me, it doesn't make sense with the vast majority of targets of the 10% tariffs.
Why?
I hesitate to predict how other countries will react, except that this has more or less given everyone an incentive to bypass the U.S., to make the U.S. a supplier of last resort, to hold the line, to have a kind of united front to compete with each other.
If the assessment is that the Dutch or the French or the Germans or the Brazilians or somebody else is talking about doing something to eliminate a 10% tariff to gain a comparative advantage in accessing the U.S. market, if that's the logic, then fine. Maybe there's something rational about that, but I think it's more likely that the targets of those low tariffs are just getting together.
My main trade competitor has the same or higher tariffs levied against them. Why should I give in if we are competing on a level playing field?
I think Trump is going to make the U.S. pay a huge geopolitical price. But what he thinks he will gain from this, I don't know. Is it likely that he will achieve anything really significant from it? I doubt it.
You mentioned a geopolitical price tag for the United States. What would it be?
The tendency of much of the world, most of the time, was to try to work with the United States, to the extent that they couldn't automatically do what Washington wanted, but they were inclined to cooperate because they saw it as benign, if not beneficial, to their interests. I think Trump has reversed that. This is going to lead to a disinclination to work with us, an incentive to try to bypass us. I think the inclination now is going to be: I'm not going to vote with the Americans, I'm going to look elsewhere first, for my investment, for my capital, for the market, for what I'm doing, for partners.
But I don't think that these measures are necessarily going to play in favor of any particular country. Maybe China in some places, the European Union in some places, Japan in some places. It's going to be a very different environment for the United States, for American companies and diplomats to operate in. It's going to be much more difficult.
This tariff strategy that you say is hard to understand is seen by some analysts as part of Trump's isolationist policy.
As my kids would say, this is so last century. This is really 19th century, the idea of bringing industries, manufacturing back to the United States. Very little manufacturing, I think, is going to come back to the United States. We have 4% unemployment. We can't fill the jobs that we have now, imagine bringing back manufacturing of basic commodities like shoes, toys, that kind of thing.
That left the United States a long time ago and went to Japan, moved from Japan to Taiwan, moved from Taiwan to South Korea, moved from South Korea to somewhere else, and then moved to China and then to Vietnam. Those things are not coming back here because there's not enough profitability to justify investing in robots and mechanizing those things to bring them back to the United States. Our workforce is small relative to the size of the economy. It's not coming back.
It's already moving from China because labor costs are so high. The fallacy in Trump's logic is that things like furniture, construction, textiles, clothing, and manufacturing would come back. And the people who would actually do the work are the people he's persecuting with his ridiculous immigration policies.
Trump has argued that he imposed the tariffs to curb alleged abuses against the United States that would benefit China. Is he containing Beijing with this move?
I don't think he really cares about containing China. But the answer is no. These moves boost China's image. Beijing has seized on the rhetoric of defending the open, globalized international trading order that the United States has attacked. They will take advantage of that as much as they can. I don't think the tariffs are part of the U.S. rivalry with China. China's rise has not disadvantaged the United States economically — it has done so to Japan, and, to some extent, South Korea and Taiwan, but not the United States. So Trump is using this argument with false, exaggerated, and distorted statements.
Could we witness a change in the world order, the end of the American era and the beginning of a Chinese era?
No.
Not even as a consequence of tariffs?
Absolutely not. Part of the problem is that China's economy is closed. One of the reasons is that it doesn't have a consumer society because people don't have enough income. That's because of the amount of wealth that the state extracts to pay for high-speed rail, military structures, and energy development. Some of that is good, some of it is excess.
U.S. tariffs won’t create a market that can rival the size and influence of the United States. It would have to be somewhere else that is very rich, and China is not very rich. China is barely in the middle-income category, it has a per capita income at a level that Mexico has been at for decades. It's not binary. So, the U.S. retreat from its leadership position in the world order, which I don't necessarily see as a bad thing, doesn't automatically hand that role over to China, Russia, the European Union, Japan, Brazil, the BRICS, or any other set of players.
Can China gain ground by investing more in countries that are affected by tariffs?
China has invested more in countries that are affected by tariffs, like Indonesia and Vietnam. These countries are very wary of Chinese investment for various historical reasons, and to some extent for ethnic reasons. But China is actually cutting back on its overseas investments because its own population is asking: Why are we giving money to countries that are richer than us? That is a reasonable question.
They have real problems meeting the expectations, demands, and needs of their own population, which is now largely urban. The cities have to function, you can't say, "Go back to the farm and do sustainable agriculture." That phase is long gone in China. So they have to spend more. Half of the population still has rural identity cards. That means they don't get free education beyond primary school. That means 50% of the future workforce won't have more than a primary school education. This is a country with enormous challenges. Can they manage them? Probably yes, but there is not much room for maneuver. Their own slowing economy will be hurt by these tariffs. I don't think that's Trump's intention, but it will hurt them.
What impact might the tariffs have on Brazil and Latin America? Do you think China will become more attractive?
I don't know specific commodities from specific places, but my general starting point is that a 10% distribution across Latin America won't have much of an impact on the price for consumers in those countries. You'll export the same amount; we'll pay more for whatever the commodity is, flowers from Colombia, grapes, wine from Argentina or Chile. Since the tariff is general, it doesn't give Chile an advantage on wine over Argentina, because they both have the same amount. Most of what Latin America exports to the United States doesn't go to China.
In short, what are the main consequences of tariffs in terms of the geopolitical landscape and the domestic landscape?
It destabilizes the international trading system that has benefited most countries for a long time. It will force adjustments, that is number one. And number two is that it undermines the image of the United States, and therefore its influence as a stabilizing, predictable, and broadly beneficial member of the international community. It disrupts economies and undermines American influence and attractiveness.
In the end, does anyone benefit from Trump's tariff policies?
No one. This is not a policy that works to anyone's obvious benefit. It upsets everyone. And there is no alternative to the United States, in the sense that the Soviet Union was during the Cold War. China is not that, and China does not want to be that.
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President Trump's tariff policy will serve no one's interests, says Thomas Fingar, a Shorenstein APARC Fellow at Stanford University's Freeman Spogli Institute for International Studies.
