To stumble into cold war or hot war based on mostly bipartisan myths would be a historic tragedy.
The U.S.-China relationship has been dogged by several pervasive myths. Overholt wants to set the record straight. Credit: Lintao Zhang/AP Photo
The recent toughening of the U.S.-China relationship is inevitable. China has changed in multiple adverse ways — from Xinjiang to Hong Kong to the South China Sea — which necessitates a more demanding relationship. But recent U.S. policy has also made things worse, because it has been based heavily on myths. Below, I outline six of the most pernicious and damaging myths undermining U.S. policy.
Myth 1: President Trump said that cutting off all relations with China would save us $500 billion, based on the trade deficit, which he blamed on China and specifically on China’s predatory undervaluation of its currency.
Actually, China’s currency was slightly overvalued. The trade deficit does not measure net benefits from an economic relationship. Famously, when China assembles a Nike shoe and sends it back to the U.S., the trade deficit shows over $100 but only $2 stays in China for the assembly and the benefits go predominantly to Americans. Trump’s trade war sought to
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