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"I do great with the Chinese," Trump told an audience at a campaign rally in Dubuque, Iowa. Photo: Bloomberg

Trump has attacked China this week accusing it of ‘one of the greatest thefts in world history’ but what is behind his attacks?

Republican presidential candidate Donald Trump accused China on Tuesday of "one of the greatest thefts in the history of the world" and said he could fix the problem by drawing on the negotiating skills laid out in his 1987 bestseller The Art of the Deal.

"I do great with the Chinese," Trump told an audience at a campaign rally in Dubuque, Iowa. "And they're great people. The problem is their leaders are too smart for our leaders. I'm a big believer in free trade. I like free trade. But it's not good if we have dummies."

The China lines, which amplified an argument that Trump has been making to large audiences for weeks, drew forceful applause. But they were more than crowd-pleasing barbs dropped into an extemporized stump speech.

The attacks on China, and the analysis attached to them, are undergirded, in the somewhat mysterious construct that is the Trump presidential candidacy, by actual, albeit sketchy, economic policy proposals. And analysts suggest these could threaten a trade war with China that would rearrange the global economy, with serious ramifications for the US.

Trump has pegged his candidacy to the idea that his economic leadership will "make America great again". Evaluating his economic platform, however - its implications and practicability - runs into immediate difficulty, owing to a lack of documentation, internal contradictions and to misrepresentations of fact on the candidate's part.

Would Trump's economic policies really make America great again?

Trump claims to be a free-trader while calling for steep new taxes on imports from China and Mexico. He has called, in the past, for new taxes on the rich but claims, in the present, to be a disciple of Ronald Reagan. He has called, in the past, for single-payer health insurance but claims, in the present, to favor a market-based system.

The Trump campaign has not issued a policy paper that captures his thinking on the economy, as it has on immigration reform. Analysts are left with the speeches and past statements to go on.

The most prominent piece of Trump's economic plan, lately, is the call for a new tariff on Chinese imports - he has mentioned the figure 25 per cent - and an extrication of some kind by the US from its trade relationship with China. The unspecified extrication would be in retaliation for what Trump characterizes as manipulation by China of its currency to keep Chinese products cheap in relation to supposedly competing American goods.

The whole thing is nonsense, said Charles Calomiris, a professor at Columbia Business School who specializes in banking, finance and monetary policy.

"I don't think Donald Trump is a stupid person," Calomiris told the Guardian. "I just think that he's not telling the truth, either because he's not capable of understanding it, or because it's just not convenient to his message to complicate things with facts. I'm not sure which it is."

Calomiris has written that Trump's analysis that China is keeping its currency weak to boost exports is flawed, because "until very recently, China's currency, the yuan, has been appreciating, not depreciating. From 1995 through 2014, China's exchange rate appreciated by 26 per cent. 

"He knows Americans are angry," Calomiris said. "They're angry at Washington, they're angry at China. And he's going to say things that foment that anger, because it's very useful for him."

The size of the trade relationships in question makes for a high-stakes game. China is the third-largest consumer of goods produced in the United States and the leading exporter of goods to the United States, ahead of Canada. Mexico is the second-largest importer from the US and third-largest exporter to the US.

The threat of a trade war from new double-digit tariffs imposed by the United States could rearrange the global economy, with graver implications for the price of US goods than any move by China's central bank.

But a mistaken picture of Chinese monetary policy appears not to be the only basic flaw in Trump's analysis of America's course in the global economy. The description also advances a basic misconception of what has become of US manufacturing jobs, other analysts have pointed out.

Trump has said that he would slap a 35 per cent tax on automobiles produced at a Ford plant in Mexico, in retaliation for what he has characterized as a kind of economic treason on the part of the auto manufacturer for heading south of the border.

The underlying premise is that the North American Free Trade Agreement and other trade deals have contributed to job losses in the United States by inviting US companies to build products elsewhere, or by opening the door to US markets too widely for foreign manufacturers.

Manufacturing jobs around the world, however, have disappeared in the face of changing technology and growing productivity, Daniel Drezner, professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University, wrote this month.

"The truth is that while a small fraction of American manufacturing jobs migrated overseas over the past few decades, a far greater fraction of manufacturing jobs simply disappeared and are not coming back," wrote Drezner. "The far bigger driver of these job losses is the creative destruction that comes from technological innovation and productivity increases."

That dynamic fits nowhere in Trump's strategy to use trade policy to grab back formerly US jobs from wherever they landed. In Trump's telling, the jobs would necessarily boomerang to the United States, and not land in some other burgeoning manufacturing economy, such as, in the case of textiles, Bangladesh.

Additional confusion arises about Trump's potential economic stewardship from his seeming characterization of foreign purchases of US bonds as "theft". Such purchases allow the United States to raise money. The global market for US bonds is a backbone of the US and international economy.

Over the past year, China has decreased its holdings of US bonds from a high of US$1.65tn to the current US$1.27tn. Yet to hear Trump tell it, China has been keeping up steady bond purchases as a form of wily double-cross.

"Think of it, they've taken our money and our jobs, our manufacturing, they've taken everything," Trump said of China on Tuesday. "It's one of the greatest thefts in the history of the world, what they've taken out of our country. They've rebuilt China. And we owe them, think of it, we owe them - they take everything - US$1.4tn [sic].

'How do you do that? That's like a magic act. How good are they as negotiators? They take everything and we owe them money!"

Whatever the potential dangers of his trade policy or lapses of fact in his analysis, however, Trump could conceivably be a good leader for the American economy as a pragmatist interested in advancing US economic growth, Calomiris said.

Would Trump be a horrible president? "I don't know," said Calomiris. "I'm not a Trump supporter, as you probably can tell. I don't think he'd make a good president; I don't think he has the temperament to be president.

"But I could tell you this. He would care about growth. And he would try to do things that would get the country going again. And that's something that we haven't experienced for the last six, seven years. So it would be a refreshing change.

"Now he might do some other things that would be quite worrying, like start a trade war with China, or destroy our happy relationship in North America, with New Mexico and Canada. I could see that he could be very unpredictable, and potentially do some things that could be rather bothersome.

"I think no matter who the next president is, Democrat or Republican, they'll be better than the current administration, in terms of growth. But let's stop blaming the Chinese."