Exclusive: China backtracked on nearly all aspects of U.S. trade deal - sources

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Exclusive: China backtracked on nearly all aspects of U.S. trade deal - sources
Reuters

URL: https://www.reuters.com/article/us-usa- ... SKCN1SE0WJ
Category: Business
Published: May 8, 2019

Description: WASHINGTON/BEIJING (Reuters) - The diplomatic cable from Beijing arrived in Washington late on Friday night, with systematic edits to a nearly 150-page draft trade agreement that would blow up months of negotiations between the world’s two largest economies, according to three U.S. government sources and three private sector sources briefed on the talks. The document was riddled with reversals by China that undermined core U.S. demands, the sources told Reuters. In each of the seven chapters of the draft trade deal, China had deleted its commitments to change laws to resolve core complaints that caused the United States to launch a trade war: theft of U.S. intellectual property and trade secrets; forced technology transfers; competition policy; access to financial services; and currency manipulation. U.S. President Donald Trump responded in a tweet on Sunday vowing to raise tariffs on $200 billion worth of Chinese goods from 10 to 25 percent on Friday – timed to land in the middle of a scheduled visit by China’s Vice Premier Liu He to Washington to continue trade talks. The stripping of binding legal language from the draft struck directly at the highest priority of U.S. Trade Representative Robert Lighthizer - who views changes to Chinese laws as essential to verifying compliance after years of what U.S. officials have called empty reform promises. Lighthizer has pushed hard for an enforcement regime more like those used for punitive economic sanctions – such as those imposed on North Korea or Iran – than a typical trade deal. “This undermines the core architecture of the deal,” said a Washington-based source with knowledge of the talks.
“PROCESS OF NEGOTIATION”
Spokespeople for the White House, the U.S. Trade Representative and the U.S. Treasury Department did not immediately respond to requests for comment. Chinese Foreign Ministry spokesman Geng Shuang told a briefing on Wednesday that working out disagreements over trade was a “process of negotiation” and that China was not “avoiding problems”. Geng referred specific questions on the trade talks to the Commerce Ministry, which did not respond immediately to faxed questions from Reuters. Lighthizer and U.S. Treasury Secretary Steven Mnuchin were taken aback at the extent of the changes in the draft. The two cabinet officials on Monday told reporters that Chinese backtracking had prompted Trump’s tariff order but did not provide details on the depth and breadth of the revisions. Liu last week told Lighthizer and Mnuchin that they needed to trust China to fulfil its pledges through administrative and regulatory changes, two of the sources said. Both Mnuchin and Lighthizer considered that unacceptable, given China’s history of failing to fulfil reform pledges. One private-sector source briefed on the talks said the last round of negotiations had gone very poorly because “China got greedy”. “China reneged on a dozen things, if not more ... The talks were so bad that the real surprise is that it took Trump until Sunday to blow up,” the source said. “After 20 years of having their way with the U.S., China still appears to be miscalculating with this administration.”
FURTHER TALKS THIS WEEK
The rapid deterioration of negotiations rattled global stock markets, bonds and commodities this week. Until Sunday, markets had priced in the expectation that officials from the two countries were close to striking a deal. Investors and analysts questioned whether Trump’s tweet was a negotiating ploy to wring more concessions from China. The sources told Reuters the extent of the setbacks in the revised text were serious and that Trump’s response was not merely a negotiating strategy. Chinese negotiators said they couldn’t touch the laws, said one of the government sources, calling the changes “major.” Changing any law in China requires a unique set of processes that can’t be navigated quickly, said a Chinese official familiar with the talks. The official disputed the assertion that China was backtracking on its promises, adding that U.S. demands were becoming more “harsh” and the path to a deal more “narrow” as the negotiations drag on. Liu is set to arrive in Washington on Thursday for two days of talks that just last week were widely seen as pivotal – a possible last round before a historic trade deal. Now, U.S. officials have little hope that Liu will come bearing any offer that can get talks back on track, said two of the sources. To avert escalation, some of the sources said, Liu would have to scrap China’s proposed text changes and agree to make new laws. China would also have to move further towards the U.S. position on other sticking points, such as demands for curbs on Chinese industrial subsidies and a streamlined approval process for genetically engineered U.S. crops. The administration said the latest tariff escalation would take effect at 12:01 a.m. Friday, hiking levees on Chinese products such as internet modems and routers, printed circuit boards, vacuum cleaners and furniture. The Chinese reversal may give China hawks in the Trump administration, including Lighthizer, an opening to take a harder stance. Mnuchin - who has been more open to a deal with improved market access, and at times clashed with Lighthizer – appeared in sync with Lighthizer in describing the changes to reporters on Monday, while still leaving open the possibility that new tariffs could be averted with a deal. Trump’s tweets left no room for backing down, and Lighthizer made it clear that, despite continuing talks, “come Friday, there will be tariffs in place.”

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Trump says he would be happy to keep tariffs on Chinese imports in place
Reuters

URL: https://www.reuters.com/article/us-usa- ... SKCN1SE1OJ
Category: Business
Published: May 8, 2019

Description: WASHINGTON (Reuters) - U.S. President Donald Trump said on Wednesday he would be happy to keep tariffs on Chinese imports in place, adding that China is mistaken if it hopes to negotiate trade later with a Democratic presidential administration. “The reason for the China pullback & attempted renegotiation of the Trade Deal is the sincere HOPE that they will be able to ‘negotiate’ with Joe Biden or one of the very weak Democrats,” Trump tweeted. “Guess what, that’s not going to happen! China has just informed us that they (Vice-Premier) are now coming to the U.S. to make a deal. We’ll see, but I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers,” he added. The United States announced on Wednesday it would hike tariffs on $200 billion worth of Chinese imports from 10 to 25 percent effective Friday, according to a notice posted on the Federal Register. Sources with knowledge of the talks told Reuters that China has sought to alter previously agreed provisions specifying changes to Chinese laws affecting nearly every chapter of a nearly 150-page proposed trade deal between Washington and Beijing. The changes sought by China would create major hurdles in reaching a deal in two days of talks with Chinese Vice Premier Liu He this week before the tariff increase goes into effect.

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Explainer: How U.S.-China talks differ from any other trade deal
Reuters

URL: https://www.reuters.com/article/us-usa- ... SKCN1SE0XL
Category: Business
Published: May 8, 2019

Description: WASHINGTON (Reuters) - Chinese Vice Premier Liu He goes to Washington for trade talks on Thursday and Friday, setting up a last-ditch bid for progress toward a deal that would avoid a sharp increase in tariffs on Chinese goods ordered by U.S. President Donald Trump. U.S. officials have accused China of reneging in the past week on substantial commitments made during months of negotiations to end their trade war, prompting Trump to set a new deadline to raise tariffs on $200 billion worth of Chinese goods to 25 percent, from 10 percent. The higher tariffs will take effect at 12:01 a.m. EDT on Friday, a spokesman for the U.S. Trade Representative’s office said. That comes right in the middle of Liu’s visit. Differences over the enforcement mechanism for a trade deal and a timeline for tariff removal have been sticking points. Here is a breakdown of the issues unique to the two-way talks:
WILL A DEAL END THE THREAT OF TARIFFS ON CHINESE GOODS?
Not likely. The United States has not made public any offers to lift tariffs, though Washington let slide a scheduled March 2 tariff increase on $200 billion worth of Chinese goods. But after accusations of China back-pedaling on commitments, Trump on Sunday made his threat to raise tariffs again this Friday. U.S. officials see the continuing threat of tariffs as the “teeth” in any agreement. The United States says Chinese companies have coerced their U.S. partners into improperly transferring proprietary technology - an accusation Beijing strongly denies. A demand for frequent compliance reviews reflects frustration among U.S. officials who have complained that China has failed to follow through on past commitments to implement free-market reforms.
HOW DOES THAT DIFFER FROM A NORMAL TRADE NEGOTIATION?
Traditional free trade agreements aim to lower trade barriers between the countries signing them. These trade deals are built on the assumption that the parties will adhere to the terms of the agreement, with the benefit being increased trade and export opportunities within the free trade zone. The Trump administration imposed new tariffs on Chinese goods to try to force changes in China’s trade, subsidy and intellectual property practices - similar to financial sanctions that the United States has imposed on foreign entities to increase pressure on their governments for changes in behavior or policies. Such sanctions are typically lifted only after the desired changes are verified by the U.S. Treasury Department.
HOW ARE TRADITIONAL TRADE AGREEMENTS ENFORCED?
Many free trade deals have built-in dispute settlement mechanisms for state-to-state disagreements over rule compliance, disputes between private investors and governments, or allegations of unfair anti-dumping and anti-subsidy duties. Arbitration panels often hear arguments from both sides, operating like a court. Canada, for example, has brought challenges to U.S. anti-subsidy duties on softwood lumber before panels set up under NAFTA’s Chapter 19, a mechanism that would be continued if the new U.S.-Mexico-Canada Agreement (USMCA) if ratified. If Mexico fails to implement effective labor reforms, the United States and Canada could seek redress through arbitration. But critics, including many Democrats in Congress, argue that this enforcement mechanism is weak and largely untested.
CAN’T COUNTRIES SEEK RELIEF AT THE WORLD TRADE ORGANIZATION?
The WTO’s 164 members can challenge each other over unwarranted trade restrictions, illegal subsidies and other unfair practices and seek resolution through dispute settlement panels. But this process is seen as slow, and its decisions too easy for countries to ignore. The United States has argued that the WTO has failed to rein in China’s unfair practices, so it has acted on its own to force change in China. The WTO’s appellate body also could grind to a halt this year as Washington is currently blocking the appointment of judges. Because three judges are needed to rule on appeals, the system could break down when two judges’ terms expire in December 2019.
CAN COUNTRIES JUST QUIT TRADE DEALS THEY DON’T LIKE?
Yes, most trade pacts have provisions for termination, but this has never been tested by the United States. President Trump frequently threatened to quit NAFTA during negotiations last year, and his administration has considered issuing a six-month withdrawal notice as a tactic to pressure Congress into approving the trade deal that would replace it. But some U.S. lawmakers and legal experts argue that Trump may not have authority to quit the agreement without Congress’ approval because the U.S. Constitution grants Congress explicit power to regulate commerce with foreign nations. Any move to quit NAFTA is likely to draw a court challenge.

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U.S. escalates trade war amid negotiations, China says it will hit back
Reuters

URL: https://www.reuters.com/article/us-usa- ... SKCN1SG08X
Category: Business
Published: May 10, 2019

Description: WASHINGTON/BEIJING (Reuters) - The United States escalated a tariff war with China on Friday by hiking levies on $200 billion worth of Chinese goods amid last-ditch talks to rescue a trade deal, as U.S. President Donald Trump signaled that talks could drag on beyond this week. In a series of early morning tweets on Friday, Trump defended his decision to raise tariffs, saying there was no need to rush into a deal and adding that the American economy would be boosted more by the levies than by an eventual deal. But even as Beijing threatened retaliation, negotiators agreed to stay at the table in Washington for a second day, keeping alive hopes of an agreement that would remove a major threat to the global economy. Trump, who has adopted protectionist policies as part of his “America First” agenda, issued orders for the tariff increase, saying China “broke the deal” by reneging on earlier commitments made during months of negotiations. China’s Commerce Ministry said it would take countermeasures, without elaborating. Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin talked for 90 minutes on Thursday and were expected to resume efforts on Friday to rescue a deal that could end a 10-month trade war between the world’s two largest economies. The Commerce Ministry said negotiations were continuing, and that it “hopes the United States can meet China halfway, make joint efforts, and resolve the issue through cooperation and consultation.” With negotiations in progress, U.S. Customs and Border Protection imposed a 25% duty on more than 5,700 categories of products leaving China after 12:01 a.m. EDT (0401 GMT) on Friday. Seaborne cargoes shipped from China before midnight were not subject to the new tax as long as they arrived in the United States prior to June 1. Those cargoes will be charged the original 10% rate. “This delay might create an unofficial window during which the U.S. and China can continue to negotiate,” investment bank Goldman Sachs wrote in a note, adding that it was a “somewhat positive sign” that talks were continuing. Trump gave U.S. importers less than five days notice about his decision to increase the rate on the $200 billion category of goods, which now matches the rate on a prior $50 billion category of Chinese machinery and technology goods. He has also threatened to impose new tariffs soon.
“NO GREATER THREAT TO GROWTH”
Global stocks gained slightly after Washington moved forward with the tariff hike, reflecting some hope that a trade deal could still be brokered. But a major world index looked set for its worst week since December. “There is no greater threat to world growth,” French Finance Minister Bruno Le Maire said on Friday. The added levy could reduce U.S. gross domestic product (GDP) by 0.3% and China’s by 0.8% in 2020, consultancy Oxford Economics said. “A quarter of our members have exports to the U.S. that were already affected by these ridiculous tariffs,” said Mats Harborn, president of the European Union Chamber of Commerce in China. “Pushing rates to 25% will prove extremely damaging to those companies, and the collateral damage will ripple around the globe. European companies are watching aghast as the U.S. and China play Russian roulette with the world economy.”
RETALIATE HOW?
In April 2018, when Trump’s tariffs were still largely just threats, China’s Commerce Ministry responded to his escalatory tweets by declaring that the two sides could not conduct negotiations “under these conditions.” But more than a year later, Liu was in Washington trying to save the deal even as Trump warned that the United States would start “paperwork” on another $325 billion in Chinese imports, after raising tariffs on $250 billion of Chinese goods. “I think the Chinese in the end will want to keep negotiations going. The question is: ‘where do they go for retaliation?’” said James Green, a senior adviser at McLarty Associates who until August was the top USTR official at the embassy in Beijing. Green expected China to increase non-tariff barriers on U.S. companies, such as delaying regulatory approvals, as it could not hit the same amount of imported U.S. goods with higher tariffs. The biggest Chinese sector affected by the latest tariff increase is a $20 billion-plus category of internet modems, routers and other data transmission devices, followed by about $12 billion worth of printed circuit boards used in a vast array of U.S.-made products. Furniture, lighting products, auto parts, vacuum cleaners and building materials are also high on the list of products subject to higher duties. Just hours after the U.S. move, which will add pressure on an already slowing Chinese economy, China’s central bank said it was fully able to cope with any external uncertainty. “Facing internal and external economic changes, our country’s monetary policy has ample room (to respond) and our money policy tool-kit is rich,” Sun Guofeng, head of monetary policy department at the People’s Bank of China (PBOC), told reporters in Beijing. On Monday, hours after Trump said he intended to raise tariffs, the PBOC cut the amount of reserves that some small and medium-sized banks need to hold, freeing up funds for lending to cash-strapped businesses.
WHO PAYS?
Fu Xubo, a 32-year-old sports equipment wholesaler in the eastern city of Yiwu, used to have several small U.S. clients. Since the trade war began, all of their orders have dried up. “Regarding Mr. Trump’s tariff policy, honestly, we just don’t understand it,” Fu said. “Since we have already joined the World Trade Organization, logically shouldn’t tariffs have continued to decrease?” Gary Shapiro, chief executive of the Consumer Technology Association, said the tariffs would be paid by American consumers and businesses, not China, as Trump has claimed. “Our industry supports more than 18 million U.S. jobs – but raising tariffs will be disastrous,” Shapiro said in a statement. It may take three or four months for American shoppers to feel the pinch, but retailers will have little choice but to raise prices to cover the rising cost of imports before too long, economists and industry consultants say. Even without the trade war, China-U.S. relations have continued to deteriorate, with an uptick in tensions over the South China Sea, Taiwan, human rights and China’s plan to re-create the old Silk Road, called the Belt and Road Initiative.

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China defies Trump with new round of tariffs on U.S. goods
Reuters

URL: https://www.reuters.com/article/us-usa- ... SKCN1SI0B8
Category: Business
Published: May 13, 2019

Description: WASHINGTON/BEIJING (Reuters) - China said on Monday it would impose higher tariffs on a range of U.S. goods including frozen vegetables and liquefied natural gas, striking back in its trade war with Washington after U.S. President Donald Trump warned it not to. The move, widely expected after the United States last week raised tariffs on $200 billion in Chinese imports, heightened fears the world’s two largest economies were spiraling into a no-holds-barred dispute that could derail the global economy. China’s finance ministry said it plans to set import tariffs ranging from 5% to 25% on 5,140 U.S. products on a revised $60 billion target list. It said the tariffs will take effect on June 1. “China’s adjustment on additional tariffs is a response to U.S. unilateralism and protectionism,” the ministry said. “China hopes the U.S. will get back to the right track of bilateral trade and economic consultations and meet with China halfway.” The White House and U.S. Trade Representative’s office did not immediately respond to requests for comment. Global equities tumbled, with MSCI’s gauge of stocks across the world on pace for its biggest one-day drop of 2019. Major Wall Street stock indexes were down about 2.5%. China’s yuan currency fell to its lowest level since December. “It’s clear that there is a lot of nervousness around the U.S.-China trade negotiations and concern that it’s really deteriorating pretty significantly, and that’s impacting all areas of markets,” said Kristina Hooper, chief global market strategist at Invesco in New York. Earlier on Monday, Trump told China not to intensify the trade dispute and urged its leaders, including President Xi Jinping, to continue to work to reach a deal. “China should not retaliate-will only get worse,” Trump said on Twitter. “I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries,” he wrote. The U.S. president, who has embraced protectionism as part of an “America First” agenda, stepped up his verbal attacks on China on Friday after two days of high-level trade talks in Washington ended with the two sides in an apparent stalemate. Top White House economic adviser Larry Kudlow said on Sunday there was a “strong possibility” Trump will meet Xi at a G20 summit in Japan in late June.
STEADY DRUM BEAT
Trump has accused China of reneging on commitments it made during months of trade negotiations, which Beijing has denied. China tried to delete commitments from a draft agreement that its laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers. That dealt a major setback to the talks. In the middle of the negotiations last week, Trump hiked tariffs on Chinese goods to 25% from 10%. The move affected 5,700 categories of Chinese products including internet modems, routers and similar devices. Trump has since ordered U.S. Trade Representative Robert Lighthizer to begin the process of imposing tariffs on all remaining imports from China, a move that would affect another $300 billion worth of goods. U.S. tariffs last year triggered retaliation by China, which imposed 25 percent levies on $50 billion worth of U.S. products including soybeans, beef and pork and lower tariffs on a list of $60 billion in goods. Beijing said on Monday it would “never surrender” to external pressure, and its state media kept up a steady drum beat of strongly-worded commentary, reiterating that the door to talks was always open, but vowing that China would defend its national interests and dignity. In a commentary, state television said the effect of the U.S. tariffs on the Chinese economy was “totally controllable.” “It’s no big deal. China is bound to turn crisis to opportunity and use this to test its abilities, to make the country even stronger.” Trump has said he is in “no rush” to finalize a deal with China. In a tweet released after Beijing’s latest retaliation, he again defended the move to hike U.S. tariffs and said there was no reason why American consumers would pay the costs. Economists and industry consultants, however, maintain that it is U.S. businesses that will pay the costs and likely pass them on to consumers. Consumer spending accounts for more than two-thirds of U.S. economic activity. In a research note, Goldman Sachs economists said new evidence showed the costs of Washington’s tariffs on China last year had fallen entirely on U.S. businesses and households, with no clear reduction in prices charged by Chinese exporters. They added that the effects of the tariffs had spilled over noticeably to the prices charged by U.S. producers competing with goods affected by the levies. The Trump administration has rolled out up to $12 billion in aid for U.S. farmers hurt by Chinese tariffs during the 10-month trade war, and indicated that more help could be on the way. Farmers, who are a core political constituency for Trump’s Republicans heading into the 2020 presidential and congressional elections, are growing increasingly frustrated with the protracted trade talks and the failure to reach an agreement. “What that means for soybean growers is that we’re losing. Losing a valuable market, losing stable pricing, losing an opportunity to support our families and our communities,” said Davie Stephens, president of the American Soybean Association.

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Why free traders and all Americans should back Trump on China policy
The Hill

URL: https://thehill.com/opinion/internation ... ina-policy
Category: Business
Published: May 13, 2019

Description: I’m a free trader, and I hate tariffs — which are consumer taxes — but if ever there was a right time to impose punitive tariffs, it is now, and it is against China. President Trump is on the side of the angels on this one, and this is the right moment to shut down China’s abusive trade practices forever. Start with the basic facts: The average tariff that we imposed on China when Trump entered the White House was about 4 percent. China’s tariffs on us were about 10 percent, and, even when including the 10 percent tariff that Trump first imposed on $200 billion worth of Chinese imports in 2018, our tariffs were still lower than theirs. So the playing field is not level and is especially tilted against us given that Beijing’s non-tariff barriers in China can make it prohibitively expensive to do business there. We have an open market competing against the world’s second-largest economy whose doors are slammed shut. Doctrinaire free traders should understand that this status quo is economically and politically untenable going forward. Trade can’t be a one-way street, and something has to give here. That means immediate reforms in China’s mercantilist economic behavior — on tariffs, on other trade barriers, on theft of intellectual property and on cyber espionage against America. We aren’t dealing with a friendly power here but with an increasingly hostile one that has become an existential threat. Trump’s strategy is to hit its vulnerable economy hard with tariffs and strong-arm Beijing into giving American companies and products greater access to Chinese markets. There is not one demand that Trump is making of China’s President Xi Jinping that is unreasonable. The free traders should recognize that if the Trump tariffs work — and this is a dangerous game, admittedly — we will have freer trade at the end of the day. Sure, the risk here is a ramped-up trade war that makes everyone poorer. This is a gamble worth taking. Trump is leveraging America’s strategic advantage over China today. China is an export-based economy that has been nurtured on near-unfettered access to America’s multitrillion-dollar consumer market. By failing to negotiate in good faith, it is putting at risk more than a half-trillion dollars of annual sales and a crash in its economy and stock market. Even the widespread complaint that the cost of these tariffs will be borne by American consumers may be exaggerated. The last round of tariffs at 10 percent had minimal impact on import prices — suggesting that Chinese companies absorbed the tariffs out of their profits rather than raising prices on goods sold at Walmart. The Chinese swallowed much of the cost themselves. Trump’s timing for this confrontation could hardly be shrewder. The American economy is riding high, as is the stock market, so we are in good shape to ride this out. Meanwhile, Beijing miscalculated, big time, in thumbing its nose at Trump’s demands. It underestimated Trump’s resolve on this issue. I know Trump: He will not back down on this, and China has only dug itself a deeper hole to climb out of. China also miscalculated the resolve of Americans and our increased antipathy toward China. I have observed a refreshing rally around the flag on this one. Senate Minority Leader Charles Schumer’s (D-N.Y.) pro-Trump tweet on China (!) is indicative of the frustration Americans feel about China’s misbehavior, economically and militarily. Several other Democrats, including Sen. Sherrod Brown (D-Ohio), also are supportive of the tariffs. We have a rare bipartisan consensus that America has to stand up to China. What free traders should be doing — if they want to be constructive — is helping Trump pass the U.S.-Mexico-Canada trade agreement, which would further isolate China and advance international trade. Speaker Nancy Pelosi (D-Calif.) should do her patriotic duty and bring the North American free trade deal into the 21st century. At least she should allow an up-or-down vote on the House floor. This U.S.-China trade dispute is the first skirmish in what is likely to become the epic economic battle of our lifetime. The future of free and fair trade is much better enhanced if Trump wins. If China forces the United States to back down, free trade will suffer a mortal wound. This would be very bad news for free traders and for global prosperity. And it is why Trump must win — and will.

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Steve Hilton: Trump has been right about China for decades while the entire establishment got it wrong
Fox News

URL: https://www.foxnews.com/opinion/steve-h ... t-it-wrong
Category: Politics
Published: May 13, 2019

Description: The big story is President Trump refusing to back down from China. "We are right where we want to be with China. Remember, they broke the deal with us & tried to renegotiate," he tweeted on Sunday. "We will be taking in tens of billions of dollars in tariffs from China. Buyers of product can make it themselves in the USA (ideal), or buy it from non-tariffed countries." Today the president is being applauded across the political spectrum for his tough approach. But remember it wasn't always like that. During his administration, President Clinton said, "Everything I have learned about China as president and before -- and everything I have learned about human nature in a half-century of living -- convinces me that we have a far greater chance of having a positive influence on China's actions if we welcome China to the world community instead of shutting it out." Clinton's successor, George W. Bush put it like this: "Open trade is a force for freedom in China, a force for stability in Asia, and a force for prosperity in the United States. When we open trade, we open minds. We trade with China because trade is good policy for our economy, because trade is good policy for democracy, and because trade is good policy for our national security." And Bush's successor, Barack Obama, said, "The United States welcomes the rise of a China that is peaceful, stable, prosperous, and a responsible player in global affairs." We were told all this by everyone in the establishment, left and right. If we open up to China, if we give them the Olympics, if we only scold them gently behind closed doors -- because they hate losing face -- .if we do all that, China will behave. What idiots! China never had good intentions. Since the late 1980s, its stated aim has been world domination, technologically and militarily. Their path to that was economic domination, achieved by hacking and stealing the West's technology and exploiting its own workers and the environment. The establishment idiots were too naive -- or too corrupted by Chinese cash -- to see it. There was one lone voice, though, two decades ago, who said the following about China: Our biggest long-term challenge will be China....The Clinton administration, like the Bush administration, follows a policy of "constructive engagement" with China. When China disappoints expectations and ignores lofty lectures, we issue a few condemnations, hammer out some meaningless resolution at the UN (if we can get it by China's UN delegation), and call upon them to comport themselves like citizens of the community of nations. Then we get back down to business as if nothing happened. How's this policy working? It isn't." Guess who said this? Well, that was Donald Trump. And in a 2010 interview with Larry King, he said, "If you look at what China is doing to our country, it's disgraceful ... They're making all of our product. We're not manufacturing anything. They're making all our products, and they're selling it to us. And then they're loaning us the money ... They take the money, then they loan it back to us. We should be fighting China." And snooty establishment called Trump an ignoramus. He was right about China. The entire establishment got it wrong. Now as president, Donald Trump is delivering exactly the tough stance he called for as a private citizen two decades ago, using tariffs as his chosen weapon. Because, of course, unlike diplomatic statements at the U.N., tariffs actually get the Chinese regime's attention. But still, you have the same establishment geniuses who got China so wrong lining up against tariffs. "If we push up tariffs, they push up tariffs, the whole global economy slows, U.S. economy slows, [and we] could be pushed into recession," said David Kelly, chief global strategist for J.P. Morgan, on CNBC. "These tariffs are a terrible idea," said Sen. Ben Sasse on "CBS This Morning." "But they're not just a terrible idea this week or this month. But they're a terrible idea because it doesn't make sense of where we are in economic history." "History shows imposing more tariffs hurts the global economy and hurts the U.S. economy," said Bob Pisani on MSNBC. "I don't think there are many people that would disagree with that on any kind of long-term basis." Actually the facts "disagree with that," Mr. Smarty Pants. Since the tariffs, America's economy has gone from strength to strength. Faster growth, lower unemployment, higher earnings -- all since the trade war that was going to wreck the economy. But if you want to really understand the depths of elitist idiocy over trade, tariffs and China take a look at what Never Trumper David Frum said in an interview: If what you think you’re doing in a trade dispute with China is protecting the industries of the 1950s, like dishwashers, you’re not going to get anything. Because what the United States cares about are the industries of the future. What we’re concerned about are the technologies, the 5G telephones, intellectual property, making sure that American moviemakers are not ripped off ...tomorrow’s industries. President Trump has no vision of tomorrow’s economy. What a perfect articulation of arrogant coastal snobbery. "Oh, my dear! We don't want manufacturing. We want the industries of the future." So, according to the establishment, we don't need washing machines now? What's David Frum going to do, shove his dirty underpants into his 5G laptop? The big point here is that this whole story is not just about economics. We are literally in a battle to determine the value system that will dominate this century and perhaps the next one, too. Freedom or authoritarianism? Democracy or one party rule? Yes, the trade deficit matters. The loss of manufacturing even more. But we need to understand that China declared war on us many years ago. As someone said to me, fighting back might mean sacrifices. But that is part of a proper war effort. But in any case, we can easily afford to fight China. To hear some people talk about it you'd think we're totally dependent on China. That is absolute rubbish. Our economy is huge, and thanks to President Trump's pro-enterprise agenda, is growing fast. Imports from China are just 2.7 percent of its total. Exports to China are a mere 0.9 percent. Over 96 percent of our economy is not trade with China. We could totally disengage from China, and we'd be absolutely fine. By the way, for years that's what I've been arguing for -- a total economic boycott of China and sanctions on other countries who collaborate with this evil regime. Make the world choose. You can do business with America or the authoritarian dictators of Beijing, who oppress their own people, put millions of Muslims in concentration camps, and are rolling out a new and insidious colonialism around the world with their rapacious belt and road infrastructure program. Which side are you on, Britain? Canada? The EU? You choose. We know which side Joe Biden is on. If he's the Democrats' candidate in 2020, China will be the defining issue on the ballot. Because Joe Biden has made his choice. He's with China. "They're going to eat our lunch ... c'mon, man. They're good people...not competitors," he said recently. Why is he saying this? Well, we told you two weeks ago. Joe Biden is compromised by China. He has taken billions of dollars from the Chinese government in the form of payments to his son's businesses. With "Joe China" in the White House, the policies of economic surrender and political appeasement would be back. President Trump is the first western leader in 50 years to stand up to China. It could turn out to be the most important policy shift of the 21st century.