Why exactly did progress toward a U.S.–China trade deal apparently slow down, and President Donald Trump finally enact his promised 25 percent tariff on $200 billion in Chinese goods? What will the effects of this be on the U.S.–China trade war, and can the Chinese Communist Party be trusted to live up to any deal at all?
Epoch Times senior editor Jan Jakielek recently sat down with Curtis Ellis, who was a special adviser to the secretary of labor in the Trump–Pence administration and is now a senior policy adviser with America First Policies. We discuss the rationale behind Trump’s tariffs on China, the longer-term implications of the U.S.–China trade war—and U.S.–China relations overall.
Jan Jekielek: Yesterday, there were a lot of headlines around these new tariffs that are coming into effect: 25 percent on some $200 billion worth of Chinese goods. In retaliation to the Chinese Communist Party renegotiating the deal, or trying to renegotiate so many points. What do you make of all this?
Curtis Ellis: Well, we have to remember the history of all this. The immediate history is, these 25 percent tariffs were supposed to go into effect Jan. 1. It’s long been scheduled. Last year, President Trump placed 10 percent tariffs on a range of Chinese goods, which we had found were being illegally subsidized, dumped in the United States at below market value—below the cost of production—in order to deliberately drive out the competition. Undersell the competition, drive them into bankruptcy, grab market share, [like] John D. Rockefeller did with the Standard Oil Trust at the turn of the last century. The Chinese are trying to do it across a range of industries.
So the Commerce Department determined after a lengthy investigation that this is exactly what’s been going on. And we would put a 10 percent tariff on these illegally subsidized dumped products. That 10 percent tariff was supposed to increase to 25 percent on Jan. 1.
But President Xi Jinping said, “Well, let’s negotiate about this.” So we sat down and started talking with the Chinese, and we postponed that 25 percent increase until March 1.
March 1 talks are making good progress. We postponed that increase previously scheduled, postponed it again. Well, as of this past week, we learn that [despite] all that good progress, the Chinese have reverted to form—I should say, the Chinese Communist Party has reverted to form—making promises and then backtracking, making commitments and then reneging on the commitments they made. Which, again, you look at the history—they made a number of commitments when they were admitted into the World Trade Organization 20 years ago [in] 2000. They never lived up to any of those commitments.
So after 20 years of reneged commitments and broken promises, and after three to four months of the latest installment of broken promises, President Trump said enough is enough, and we will now have the 10 percent tariffs increase to 25 percent. And he said we’re going to look at another $325 billion worth of goods imported from China that currently have no tariffs on them, and maybe we’ll put 25 percent tariffs on those, too.
You have to remember that it’s only after we put tariffs on these Chinese goods that China even sat down and started talking about anything. Previous administrations would have high-level dialogue and commitments and take the Chinese Communist Party leaders at their word that they were going to do something, and they never did.
Mr. Jekielek: So one of these items that they’re reneging on is lifting these forced technology transfer requirements. Can you speak to that a little bit?
Mr. Ellis: The Chinese Communist Party is engaged in wholesale economic aggression against the United States. This is something that’s often lost in a lot of the discussion you see in the corporate media. They think this is some type of commercial dispute. There’s a bigger picture, which we will get to.
But there are at least seven forms of direct aggression that these tariffs are in place to address. You have the cyberespionage [by] the People’s Liberation Army of the People’s Republic of China. It’s been systematically hacking into government computers, industrial computers—our industry, our companies—and our military computers, grabbing personal information on millions of Americans, trade secrets, and military secrets. [For] what they can’t steal, they put a metaphorical gun to the head of American businesses and say: “As the price of doing business in China, you have to hand over your blueprints and your trade secrets. You’ll form a joint venture with the majority Chinese owner—a partner, majority owned by the Chinese partner—and you will give this joint venture all of your blueprints and plans and technology.” And American businessmen naively think this is a good idea.
Mr. Jekielek: It sounds utterly insane. Why would people ever do this?
Mr. Ellis: I know. They say, “Oh, there’s a billion-and-a-half Chinese consumers,” and they see dollar signs in their eyes. They get blinded by the gold.
Mr. Jekielek: So it’s more, basically, that they’re afraid that someone else will get in there and do the deal—
Mr. Ellis: Right—
Mr. Jekielek: —if they don’t do the deal.
Mr. Ellis: That’s right. Again, I mean, this is short-term thinking versus long-term thinking. Short term, “I want to get that money right now.” What happens in the long term is the Chinese partner takes those blueprints, takes those trade secrets, and sets up an outside company, which then goes in direct competition using that technology, and drives this partnership and drives the foreign business out of business because there’s now a Chinese competitor wholly owned by the Chinese. That’s a second form of economic aggression.
So whether it’s the forced technology transfer or the cyber hacking, you have widespread intellectual property theft. Remember, communism negates private property.
The Chinese Communist Party—and their ideology—really doesn’t recognize private intellectual property, any more than it recognizes private real property. So your patents, your ideas, your copyrights—meaningless. And they feel completely at ease stealing them, counterfeiting them, ripping them off. This is costing American companies hundreds of billions of dollars a year. That’s the third form of economic aggression … that we’ve asked China to do something about, to fix, which they’re not doing.
They are also engaged in currency manipulation, where they rig the exchange rates, so they deliberately lowered the value of their currency. That gives their companies an advantage in the world marketplace. It makes it appear cheaper than foreign competitors. The state-owned enterprises … the government of China owns and subsidizes companies. They own companies, and they provide these producers, these companies with direct subsidies in the form of free money, free energy, lower no-interest loans, land—because as I said earlier, they don’t recognize private property, so they’ll just take somebody’s land and give it to a company and build a factory and say, “OK, now operate the factory there.” These are not market free-market principles.
But these state-owned enterprises are now in competition with companies—American companies, foreign companies that do operate on free-market principles. Obviously, [Chinese companies] have an advantage.
And these state-owned enterprises are producing goods that have been dumped at below-market value inside the United States and on the world market. And they are driving private enterprise out of business. They’re driving companies that operate according to free-market value, free-market principles out of business, because they’ve got all these heavy subsidies and advantages. So that’s another form of economic regression and another issue that we ask China to address in these trade talks.
And then—this one is out of the economic realm, but another form of aggression—China is the source and the world’s major producer of fentanyl, an opiate, a powerful synthetic heroin that is chemically concocted in laboratories—no poppies, no poppy fields involved. This comes directly out of factories in China, and it’s shipped here. And it’s so potent, and so strong, and so concentrated that an envelope would contain enough to kill a trainload of people.
Mr. Jekielek: Right.
Mr. Ellis: This is being shipped into the United States.
Mr. Jekielek: It’s very easy to smuggle, basically.
Mr. Ellis: Very easy to smuggle. China has this total surveillance technology. They track facial recognition, they know where everybody’s going. They track everything on the internet. They know who’s buying what, who’s selling what. But, for some reason, they can’t seem to locate these factories that are producing this poison which is killing tens of thousands of Americans.
Mr. Jekielek: [And] a big part of this opioid crisis that America is facing right now.
Mr. Ellis: The opioid crisis happens to be centered in the very states that used to have industries and jobs and factories that are now in China.
Mr. Jekielek: Terrible irony. Yes, sir.
Mr. Ellis: This is the new opium war, as I’ve called it. And, look, China was subjected to this more than 100 years ago. It was disgusting, it was horrible. The British crown created the opium trade to subjugate China. And they’ve learned their history well. And the Chinese Communist Party is now turning the tables and using this form of … really, it’s a form of chemical warfare against the American body politic to dispirit and humiliate and discourage and depress the American population.
Mr. Jekielek: So, you know, this sounds outrageous. We’ve heard about some of these things. But when you say it that way, it’s almost like, is a deal even possible with a nation that is basically using these kinds of methods? Are they going to play fair, given the fact that they haven’t played fair up to now?
Mr. Ellis: I think there are millions, probably tens of millions, hundreds of millions of people in China who would like to play fair—who are moral, decent people. And, unfortunately, they’re being repressed by the Chinese Communist Party. These are people of faith that are seeing their conscience violated, seeing their churches and places of worship bulldozed, their traditions stomped on and repressed in the name of this atheistic Marxist–Leninist philosophy.
Chinese people are hard-working, entrepreneurial everywhere on earth. You find Chinese people doing business and prospering. And they don’t need to steal to do that. So the Communist Party of China is another story. It’s such a huge country that by giving out favors and favoring their cronies and their friends and their children and the people they can bribe and people they can extort money from, you’re able to create a class of hundreds of millions of people that are doing quite well.
But if you were to take away these subsidies, take away all of these violations of international rules, the Chinese people can still prosper. I have a feeling they’d prosper even more if they weren’t subjected to the Marxist–Leninist, Xi Jinping thought or something. Look, as I said, the Chinese people are very … they’re smart, they’re geniuses. In America, some of the best top research scientists in every field, you find Asian-Americans, you find Chinese-Americans, you find Chinese nationals here. So they don’t need to be doing this. The only reason they do it is so that the cadres of the Chinese Communist Party can extract extra power and extra wealth.
Mr. Jekielek: So there is perhaps some way … the president, after the short meetings that were happening … with the Chinese trade representative—he was saying that he believes there’s … I believe the term is candid and constructive dialogue that had happened. So he still believes that some sort of a deal is possible with, obviously, the Chinese Communist Party we’re talking about here. How can we trust the Chinese Communist Party to make good on its side of the deal? I guess that’s my question.
Mr. Ellis: If the cost of not making a deal is too high, then it becomes in their interest to make a deal. It’s that simple. Deal, no deal. What’s better for you? If they feel it’s better for them to have no deal, there’ll be no deal. What’s happened in the past is, they thought they could get away with their cheating. They thought they could get away with happy talk and empty promises, [with] the Americans in this cloud of self-importance, thinking: “Oh, we will always be on top. Everybody wants to be just like us, and the Chinese Communist Party shares our values. So we’ll just let this go along, and over time it’ll all work out.”
They could get away with it, but we have a different customer in the White House now and he’s not buying that. He understands exactly the nature of the problem, the nature of the threat and the challenge we face. And that’s the bigger question that I think we need to look at which is missed in a lot of the commentary on this so-called trade war. It’s not just a trade war. This is a war of values, a conflict of ideologies.
What’s at stake here is not simply cheaper TV’s or cheaper T-shirts or everyday low prices at the department store. What we’re witnessing is a contest over who will own the future and over the continued existence of American ideals—what we’d call Western ideals: freedom of speech, freedom of thought, freedom of conscience, freedom of religion, private property, individual rights. The Chinese Communist Party does not believe in individual rights. They believe in collective wisdom or collective leadership or obedience and authority. They don’t believe in private property, [and] freedom of speech extends only if you speak what we deem to be proper speech.
Mr. Jekielek: Politically correct speech.
Mr. Ellis: Politically correct speech. Yes. Thank you. Freedom of religion—no such thing. Ask the Uyghurs. Ask the Christians. Ask the Tibetans. Ask the Buddhists. Ask—it’s not a religion—the Falun Gong if you’re allowed to follow your conscience. Chinese communism—socialism with a Chinese characteristic—is still an atheistic philosophy, a materialistic philosophy. They don’t believe in any higher spiritual dimension; we do here in the West and in the United States. Will America continue to exist? Will all of these ideals that I just went through continue to exist?
A world [in which] the supreme power, the top power, is the Chinese Communist Party will be a very different world than the world we live in. Censorship will be the norm. Direction—everything will be directed by a central authority. It’s already starting to happen where you see … CBS. CBS is censoring its content according to the wishes of the Chinese Communist Party so as not to offend the Chinese. Marriott Corporation fires people who offend the Chinese because they want to do business in China. And China’s … the communist commissars say, “Well, you can’t talk about this, you can’t do that.” And anyone who does must be fired, so they fire them.
We can’t allow that to happen. And that’s exactly what’s at stake here.
And I tell people that if America were to be subordinated to the Forbidden City of Beijing, your children and grandchildren applying for a better-paying job at a company owned by the Chinese or that wishes to do business in China, your kids and grandkids, would have to get in line behind how many millions of the children of the Chinese Communist Party and would have to toe the line.
Because we see this social credit score where everything you say and read and write and post, and have you taken [and passed] the quiz on Xi Jinping thought? Did you get a high enough score on it? That determines what jobs you’re allowed to have. That determines what apartments you’re allowed to have, what schools you’re allowed to go to. That’s the future that they have in mind for the entire world. And that’s what’s at stake here. It’s not about cheaper T-shirts or a cheap television set.
Mr. Jekielek: It sounds terrifying when you put it that way. And we’re talking about a trade war here. But, really, you’re saying that this trade war is just a subset of a broader Cold War? Would it be fair to say that it?
Mr. Ellis: It’s the subset of a broader war, of a broader contest. Because the classic Chinese military strategy says the best general defeats the enemy without firing a shot. Kinetic warfare, actual bombs, and missiles and guns, that’s the last stage. If you can undermine your opponent’s will to fight, if you can use deception and spies and whatnot to steal your opponent’s plans so that they don’t fight, so that you counter them before they even step on the battlefield, that’s a win. That’s a victory.
The Chinese Communist Party sees this economic contest as part of the broader war. The goal is for China to be the supreme power in the world, to be the global hegemon, to control key industries, key technologies of the 21st century from agriculture to biotechnology to robotics, artificial intelligence, computing automotives, smart automotives—self-directed cars, autonomous vehicles, things like that, electric vehicles. And to lock up through contracts and whatnot, lock up the resources for producing these, whether it’s the rare earths, the cobalt in Africa, whether it’s oil, petroleum reserves. And to also lock up the strategic choke points in the world through the Belt and Road initiative to have military bases, port facilities, and the South China Sea, Straits of Malacca, Straits or Formosa, the Cape of Good Hope, around the Indo-Pacific region, and in the Mediterranean.
That’s their goal. Notice, they’ve yet to fire a shot. All of these things I’ve talked about—acquiring the resources, acquiring the bases, gaining the technology—they’re moving toward global supremacy without having deployed any troops on the field.
Mr. Jekielek: So, in a sense, these tariffs on the economic sphere are just an attempt to kind of level the playing field in a way? Would you say that?
Mr. Ellis: Yeah. There’s two things going on with the tariffs. One is, it’s cutting off Chinese access to the American consumer market, or limiting it, because they need the hard cash. They’re buying basing rights around the world, they’re entering into these deals around the world, acquiring companies and whatnot, using Western cash. They’re getting that cash from aisle 6 of Walmart by selling goods there.
But the other thing to keep in mind, as I said before, these tariffs came about after a lengthy investigation by the U.S. Commerce Department, which determined that these goods being produced in China are being subsidized. So the tariffs are basically making up for that subsidy. If a piece of product X is risky being priced 25 percent below the cost of production, by putting a 25 percent tariff on it, you’re leveling it up. And this is, in the jargon … countervailing duty.
And it’s long recognized—every country does it. It’s internationally recognized as a legal, legitimate thing to do. If a country is offering export subsidies to its industries in order to give its companies an advantage in export markets, the importing country is allowed under international law and internationally accepted rules to make up the difference with this leveling tariff, with this countervailing duty. So that’s what these are.
Now, you have to remember that Adam Smith, the father of free-trade theory, who said really—everybody always quotes Adam Smith—you know, tariffs are bad and free trade good. In his book “The Wealth of Nations,” he laid out when tariffs are absolutely necessary.
Not just good but necessary. One of the exemptions or exceptions to his blanket theory of “free trade good, tariffs bad” [was] that tariffs are good to preserve an industry that you need for your national defense.
He said the British, and back when [Smith] wrote this book, the British had tariffs to protect and preserve their shipbuilding industry and their shipping industries. The British Navy was, of course, the instrument of national defense and what they used to build an empire. And he said these tariffs and protection of the shipbuilding industry is probably the wisest of all commercial regulations, because defense is superior to opulence.
So, yes, we want opulence. We want cheap TVs, for example. We want lots of consumer goods. But more important than that is defense.
Mr. Jekielek: We don’t want it at the cost of the country or identity.
Mr. Ellis: Exactly. That’s Adam Smith talking.
So defending the industries necessary to defend the country is more important than luxury goods or having nice things. Another example he says is when another country imposes tariffs, duties on your imports, you should impose an equal tariff on theirs in order to incentivize them to drop their tariffs or to equalize.
Mr. Jekielek: So that’s this “leveling the playing field” part.
Mr. Ellis: Exactly. And that’s reciprocal trade. There is a bill before Congress now, the Reciprocal Trade Act, where the president would be able to impose equal duties on a country that it imposes on us.
Mr. Jekielek: Doesn’t sound like rocket science.
Mr. Ellis: Textbook Adam Smith. Another example he says is when … the producers in your country are subjected to a tax and another country’s producers are not subjected to that tax it makes sense to impose that tax. A duty, a tariff to equalize it so as your producers, your industries are not at a competitive disadvantage. Now, here you could say that our labor standards—we have minimum wage laws, we have Social Security taxes and Medicare taxes that are imposed on payrolls. We have property taxes, of course, the income tax and what not, corporate taxes imposed on every company doing business in America. It would make sense that we would impose an equalizing tariff so that the goods coming into the country are paying that same tax, because right now they’re entering the country tax-free. They’re not paying a tax. They’re not paying Social Security tax on the workers in Guatemala or Mexico or China.
Mr. Jekielek: Right.
Mr. Ellis: So, we would want to … according to Adam Smith’s basic theory, we should be imposing a tariff and equalizing tax on all of those goods.
Mr. Jekielek: This is absolutely fascinating. Again, when you put it this way it just feels … stop and start.
So it seems like there’s been a lot of back and forth here and these negotiations and we’re hoping—a lot of Americans are hoping—for a deal, but it doesn’t look like one is coming immediately.
With these trade negotiations, a lot of Americans and, I think, politicians were hoping for a deal sometime soon. It looks like there may be yet several more rounds to go, perhaps, a longer protracted fight of sorts. What do you think?
Mr. Ellis: I think you’re right there. I think this is going to take time. It’s taken us 30, 40 years to get into this mess, and it’s going to take a while to get out of it. All of the critics of President Trump’s tariffs—they say tariffs are bad, this, that, the next thing. They’ve yet to offer—I don’t hear any—any alternative. They’re not offering any ideas as to what they would do to stop all of those violations, those egregious assaults on our economy and on our country. Saying tariffs are bad because they learned this [in] Econ 101 when they went to school somewhere. They read it in a book somewhere.
But they’re not telling us what they would do to stop China and stop the Chinese Communist Party from continuing its ongoing assault against our industries, our country, and our values. So that’s one interesting thing.
The other thing they miss is the bigger picture as I said before. This is not about the price of T-shirts, [it’s] not about getting cheap TVs, filling up your storage unit, you know, with so much junk … at a cheap price [that] you can’t even keep in your house anymore, so you now have to get a storage unit to store it all. This is about the future. Will we have a country? Will the American ideals continue? And it’s even bigger than that.
For so long, we’ve behaved and we—meaning the commentariat, the intellectual class—has framed the debate over the economy as ultimate efficiency. Look, our goal … the government’s policy—our government economic policy and its overall policy—is not efficiency. It should be raising the quality of life of its citizens, all its citizens.
Our goal here is not simply the cheapest T-shirt and the maximum economic efficiency as measured on some spreadsheet. It’s the best quality of life for people, which then gets almost into a … philosophical or almost spiritual dimension of what is the best quality of life. Will cheaper consumer goods … is that the sole measure of a better quality of life—of happiness? Will that bring you happiness? Because remember what’s in the founding documents of this country: the pursuit of happiness.
We’re starting to enter into a really interesting discussion which cannot be explained simply in economic terms. And this is where you go back to individual rights: freedom of conscience, freedom of speech, these freedoms and liberty. There is something here, which not going too far into this, but there’s another dimension here at work. And as I say, keeping it simple, we can’t define quality of life … I don’t think anyone watching this, and I’m sure that the overwhelming majority of Americans would never think that you can explain or reduce happiness and quality of life to simply the greater a mass amassing and consumption of material goods.
Look into your child’s eyes and tell me that. Look into your mother’s eyes and tell me that happiness is simply about things and stuff. No. People know better than that. Actually, Ambassador Robert Lighthizer, who is a very hard-nosed, brass-tacks kind of guy, a tough negotiator as well, said: “We have come so far in defining the economic policy in the debate and the discussion, that we no longer think efficiency is the goal here. And it’s not about cheap T-shirts. It’s about raising the quality of life, maximizing the quality of life for the American citizens.”
Mr. Jekielek: And what about the … there are specific groups of people in America, of course, that are actually even being targeted on the Chinese side. Soybean farmers [are] one example. How can those folks that are, of course, suffering economically potentially because of this, how can they get through this?
Mr. Ellis: President Trump has said that revenues that come in from tariffs can be used to purchase commodities from the farmers to buy soybeans, buy the crops. Let’s be clear here that the price of soybeans has fallen over a period of years, not simply as a result of the tariffs and from the Chinese curtailing their purchases. Part of the problem is that Chinese hogs have been dying from a swine flu, so they don’t have the demand for soybeans.
Mr. Jekielek: So to that specific issue, there’s a combination of factors.
Mr. Ellis: Yeah, there’s a combination of factors. And the other thing to keep in mind is, look, farmers are a hardy lot. They have faced uncertainties. Every year, they face uncertainties. They put seeds in the ground. They don’t know if there’s going to be a drought or a flood, or if they’ll be able to get a crop out of the ground six months later. They’re gamblers. They’re dealing with the most capricious of elements—it’s called nature, and there ain’t no predicting what nature is going to do. They have good years, they have bad years. They don’t want to be at the mercy of a monopolistic processor. Right?
Mr. Jekielek: Which the CCP certainly is.
Mr. Ellis: And that’s CCP’s goal—to monopolize, to be the food processor, to have more than market influence over agricultural commodities on a global scale. The farmers in this country have a hard enough time when Tyson is the monopoly processor or Cargill. They have enough of a beef with that. When the processor is now in Beijing, they know that it’s not going to be any better; in fact, it will be far worse. There are a lot of things we can do to make sure the farmers and the ranchers and the growers are not inordinately taking the brunt of this. And you have to remember, again, it’s funny when you get back to the discussion they always act like it’s President Trump’s fault that the farmers are hurting.
It’s the Chinese that are imposing these tariffs. It’s the Chinese that are curtailing their purchases of soybeans in a deliberate attempt to target political constituencies. We imposed our tariffs after a lengthy investigation, which found out their industries, their products, were illegally and unfairly subsidized and being dumped here at below the cost of production. They retaliated with tariffs not based on: “Oh, well, we determined that soybeans are being unfairly subsidized.” No, it’s like, “We’re going to put a tariff on soybeans because those farmers are in swing states that President Trump needs for re-election.” They’re using tariffs like economic sanctions, not in accordance with any internationally accepted norms and rules.
Mr. Jekielek: So, given all of this, where do you expect things to go? We just had this meeting, presumably constructive. Where are things going to go in coming weeks, in your view?
Mr. Ellis: I think there’s going to be some protracted negotiations that are going to stretch out over weeks. I know that President Trump is not going to back down. That’s one thing you can take to the bank. He understands exactly what’s at stake here. And we’re now finally … [the] long overdue conversation has begun and an awareness that what is being negotiated, what is being contested is the future of our country and the continued existence of a private enterprise, free enterprise system, and the values—American values. Because should the Chinese—the Chinese Communist Party—prevail in their efforts to undermine American industry and the American economy and the American country, everything that we know and value and cherish will become an artifact of history.
President Trump understands—and the Washington establishment is beginning to understand, they’ve woken up to the fact—that China, the Chinese communist regime is not like any other economic competitor in the world, and the American people understand it, too.
So this is going to go on for a while. This is going to go on for quite a while.
This interview has been edited for clarity and brevity.