A Better Way to Pressure China?

As I mentioned here once before, I know from my own sources close to Trump that he believes we can indeed win a trade war with China because China needs the U.S. more than the U.S. needs China, and thus that the Chinese will blink first. Maybe this is correct, and maybe Henry Olsen is correct to argue that tariff policy should be understood politically rather than economically. Generally I agree that politics is prior to economics, which I delight in saying to annoy my economist friends. Alexander Hamilton and Abraham Lincoln would agree with Henry.

However, Trump’s tariffs are very risky, and may well backfire politically as well as economically. The Washington Post notes that the Chinese have aimed their retaliatory tariffs right at Trump country rather than Wall Street, or Silicon Valley. See, for example, this map of soybean production (China is targeting U.S. soybean exports among other things), which overlays in red the areas that voted for Trump:

Read the whole thing for the impact of the other items China is threatening to target with tariffs.

If you really want to bring pressure on China’s government on both trade and North Korea, how about this idea instead: No more visas for Chinese students to come to American universities. China’s elite will howl with indignation. Bonus! So will many American universities! It is well known that many universities now rely on full-tuition paying Chinese students as part of their revenue model. (I know of some marginal academic programs that might have to close down if they didn’t have rich Chinese students cross-subsidizing everyone else.) And if you want to up the pressure even more, put in restrictions on the ability of Chinese to invest in American real estate. Another thing not widely perceived is that sending your kid to college in America is a great way for rich Chinese to get around the country’s capital flight controls, as rich Chinese buy a nice house and fancy car for their kids.

I don’t think much of the threat that Chinese student would go to European universities instead. A few might go to British universities, but having spent years learning English, do they really want now to learn German?

Related: And why not pull the plug on the various “Confucius Institutes” that China has planted in American universities while we’re at it?


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