US Risks ‘Forever’ Replace Battle With China, Roach Says

Certainly.We'll talk a little bit more about Hong Kong a little bit.But I want to get to your latest column about how you think U.S.trade policy is incoherent. What do you think is wrong about itright now? Well, I don't think we know what we'retrying to accomplish with trade policy. Are we trying to reduce the tradedeficit? Are we trying to stopChinese technology? Are we trying to protectU.S. industries andgreen technology products who do not.

Have a comparative advantage?You do not have the scale. Are we trying to contain China and geostrategically, what are we trying to do?I mean, we're multiple goals with with one instrument.And I would say and I've written books about this, thatwe have a huge trade problem. We have deficits with over 105countries. We're going after the biggest one.But, you know, that leaves, you know, 100 plus countriesthat still have significant imbalances with the United States.And as we squeeze the Chinese piece,.

That portion of our deficit goes to themand their higher cost producers and that taxes American consumers.So what are we doing with trade policy? Do we actually have a clue, a strategyas to what we're trying to accomplish? You know, politicians, they see the wordtrade deficit and they start running and they start trying to put a positivespin. As an economist, you think having atrade deficit is a bad thing? You know, for politicians who most ofwhom have never taken an economics class?Trade deficits are bad. But the point that I have made to ourfriendly politicians in Washington is.

That the trade deficit really is ontheir backs by running massive budget deficits.The United States is suppressing domestic saving, forcing us to importsurplus savings from abroad and running massive trade deficits to attract thecapital. So you want to fix the trade deficit?Mr. Politician Look in the mirror and fixthe budget deficit in the United States. Stephen Walt We're talking to theintersection of politics and business, obviously.Let me take the devil's advocate on your claim about essentially a forever war.The Biden administration, they tell me.

Essentially in economics and in trade,the Biden administration officials that I've spoken to say, listen, it's only asmall proportion of products that are being tariffs right now of the overalltwo way trade between China and the United States, EVs, even at 25%, theywouldn't nobody there was no access to EVs.A Chinese EV is in the United States. Syringes and surgical gloves.The Chinese have the scale already to outcompete any product that the UnitedStates might make, and that's not going to necessarily spur domestic industry.And so it goes back to the question is, is this just for political show?Because Donald Trump and the Republicans.

Are talking 60% across the board on allChinese tariffs? Well, there's no mistaking, Steve, thepolitical motive here is, you know, we're certainly in moving into the mostintense part of our rather insane political season.But the new tariffs that were just announced a couple of weeks agocover $18 billion of items. But how about the old tariffs that arestill in place that were put in place by President Trump 2018 to 2019?That covers something like $350 billion of imports from China.They are still in place. So we're throwing bad money after badmoney and the level of tariffs.

I think the latest numbers are roughly20% tariffs on all Chinese products versus free trade war of a number closerto three. So,you know, I take no comfort from the fact that these latesttariffs on Chinese imports are small. The overall volume of tariff imports ishigh and likely to rise further. What about what the U.S.says about overcapacity? I mean, are those claims, you think,overdone? I mean, the Chinese are obviouslyhelping, subsidizing and supporting the production of clean tech and the like.They're totally overdone.

I mean, first of all, and I think youreported on this when you mentioned my comments in Beijing on Friday when itcomes to green technology goods. But in today's world, that is gettinghugely challenged by climate change. There is no such thing.As excess capacity. We need all the capacity we can get tomove away from carbon to alternatives. Shame on us if we don't have thecapacity to make those goods at home. But in the meantime, let's takeadvantage of somebody who has the technology, who has the scale, who hasthe product, who can help make global climate.You know, I certainly won't end climate.

Change, but help make global climatemore more tolerable in the meantime. Right.What do you think the fix should be? So what should a what should a USpresident that's party agnostic question What should a US president do to eithermanage or spin the deficit problem, whether that's trade or budget?Like far be it for me to have a solution to a problem that has spanned bothparties over decades. I mean, I've looked at the budgetnumbers, you know, since I think 1962, according to the Congressional BudgetOffice, we've been in deficit every year except two.So there's no easy fix.

It's politically expedient forpoliticians to keep pumping more money into theirconstituencies, and they never lose by doing it.They never lose their position in office.So they're not going to stop. And they are unaware or unwilling toaccept the consequences for their irresponsible fiscal policy.And trade is one of them a big one. Stephen, you just came back fromBeijing. What's the mood on the street that yougot from there? I mean, you've taught lessons at YaleUniversity about the property crisis in.

Japan that lasted nearly two decades.You see parallels there and just at the beginning.But there's also some despair, I would assume, among small to medium sizedenterprises and young people. What did you find?I found a Beijing that really didn't have muchof the spark that I had been accustomed to over my many years of travelingthere. Steve, especially, as you said, amongstprivate sector entrepreneurs and students, not just undergraduatestudents, but graduate students completing PhDs and leading Chineseuniversities with not much hope for job.

Prospects.Post Ph.D.. I think the mood was onecertainly the best I could call it was a mood of grim resignation.And you can go further, but I don't care.Care to really do that fixable either.So cyclical or is there a structural component here that and if it'sstructural, do you think they have the toolkit to manage that structural?It's a big structural issue. And what what my work shows and actuallywhat President Xi has elliptically saidrecently is that because the population.

Is declining, the workforce isdeclining, China needs to boost productivity, even cited a term I'm surehe knows nothing about total factor productivity as a potential offset.And China's new approach to focusing on new productive forces is aimed at doingthat. And there are consequences of that ofthat for the rest of the world that, you know, we're pushing back on, which isunfortunate. China needs a lot of help in grapplingwith its structural issues. And it would be not only in China's bestinterest, but for the rest of this region as well as the world for them tosucceed.

And in you're seeing that Hong Kongmight be feeling those effects in some ways.I mean, it's been few months since you wrote that controversial column thatthat Hong Kong may be over. Just wondering what what are you lookingfor on this trip, being in Hong Kong? Well, I'm looking for some interestingdiscussions from my good friends.Number one, to see if they're still friends.And number two, to, you know, hear their side of the story.They have pushed back on me a lot, saying Hong Kong is historically themost resilient economy in the world and.

You're missing that.And even you said, well, you know, China's connection may cause problems.It's not that it may cause problems, it will cause problems.The linkage between Chinese economic growth and Hong Kong economic growth hasa precision that will stagger you. I've done the math.I can cite the numbers, but when China underperformed.Forms. There is no way that Hong Kong canoverperform. So is this more about Hong Kong being apart of the Greater Bay Area as well as what, China's a vision or is it?You know, is is is Hong Kong still able.

To maintain that international status?That's the question. You know, I'm looking forward todebating that. I think Hong Kong still has an importantrole to play as an international financial centre.But, you know, it's getting certainly swallowed up by the mainland.It's part of the Greater Bay Area. It is not the crown jewel of the GreaterBay area as the press release would lead you to believe.I am delighted to be back here, but I think Hong Kong faces challenges ofhistoric proportions for the city.

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