Trump Is Right About China Trade
Small manufacturing can thrive on a level playing field.
MARK LOUCHHEIM OCTOBER 02, 2018
The conventional wisdom about manufacturing is wrong. It isn’t a lost cause, and the U.S. isn’t destined to become a pure “service economy.” In fact, new technologies including numerical controls, lasers and robotics have propelled a renaissance in American manufacturing. My Los Angeles-based bathroom-accessory and toilet-partition company has benefited from this, investing continually in our facilities, technology and best practices to remain globally competitive.
|A welder working in a Denver manufacturing plant.
Nonetheless, our company is effectively shut out of China—a vast and growing market—due to its 25% tariffs on our exported products. In contrast, duties on competing goods from China to the U.S. range from 2.5% to zero. I love free trade, but fair trade is also important.
President Trump’s tariffs may harm major multinational manufacturing companies that have significant operations in China and companies that import products from China. But for many small and medium-size manufacturers such as ours, which create most of our products at home, the tariffs have minimal impact. There is no better time to level the playing field with China than now. The economy is growing quickly and it can absorb the short-term pain from reciprocal tariffs.
The U.S. is in a strong negotiating position because of its large trade imbalance. The U.S. exports about $130 billion worth of goods to China annually, while China exports $506 billion worth of goods to the U.S. That means a larger share of Chinese output can be hit with U.S. tariffs than vice versa.
Another advantage is that a large portion of U.S. exports to China is commodities, like agricultural goods, that have markets all around the world. In contrast, Chinese exports to the U.S. are largely manufactured products, which would be more difficult to sell elsewhere. China has more to lose in a trade war despite its bluster about not negotiating.
If America’s goals are to stop unfair competition from China, preserve our manufacturing base, and open China’s markets to our products, we need to look toward the long term. Over time, a level playing field with fair trade and protection of intellectual property will be a good thing for U.S. manufacturers—especially those that continue to invest in new technologies. It’s worth a bit of friction with China over the short term to get there.
Elite opinion is overwhelmingly opposed to Mr. Trump’s China strategy, based on the assumption that U.S. manufacturing is doomed no matter what. But leaders at manufacturing companies like mine know that pressing for fair competition can help ensure the continued vitality of our industry.
Mr. Louchheim is president of Bobrick Washroom Equipment Inc., a 112-year-old Los Angeles-based manufacturing company with plants in five U.S. states, Canada and the U.K.