STEPHEN S. ROACH
The United States does not have a coherent trade policy. It has a political strategy masquerading as trade policy that has taken dead aim at China. Unsurprisingly, China has responded in kind. With the two superpowers drawing on their allies for support – the US leaning on the G7 and China turning to the Global South – economic decoupling is the least of our problems.
It is easy to blame US Presidents Donald Trump and Joe Biden for this unfortunate turn of events – Trump for firing the first shot in the Sino-American trade war, and Biden for doubling down on protectionism. Yet the problems predate both presidents – they stem largely from a decades-long misunderstanding of the role foreign trade plays in open economies.
Politicians tend to see trade balances in black and white: surpluses are good, deficits are bad. For the US, where the merchandise trade balance has been in deficit for all but two years since 1970, trade is viewed as bad – a source of leakage in an otherwise strong economy that puts pressure on jobs, companies, communities, and incomes.
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