California designs a trade plan to blunt tariffs. Be careful, China expert says.
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Ali Martin Staff writer
As President Donald Trump takes fast-changing swipes at U.S. trade relationships around the world, California Gov. Gavin Newsom is challenging the president’s authority and taking steps to curb economic blowback.
California launched a lawsuit against the Trump administration Wednesday, aimed at the executive privilege President Trump has cited to impose tariffs without congressional approval under the International Emergency Economic Powers Act.
At the same time, Mr. Newsom has said California will pursue its own trade relationships with other nations and hopes California will be exempt from retaliatory tariffs. Studies show the state will lose billions of dollars as trade wars continue.
Why We Wrote This
Can one state craft a workaround to the Trump administration’s tariffs? California, with its massive economy, aims to try – but could be courting problems.
California’s power on international trade is limited by federal jurisdiction over trade policy. Mr. Newsom is banking on the lure of doing business with the world’s fifth-largest economy, which may not hold the sway he thinks it does, experts say. And, they say, California’s status as an economic superpower is not enough to circumvent the U.S. Constitution. Article 1, Section 8 gives trade power to Congress – an argument the state makes in its lawsuit against the president.
Still, subnational relationships hold value. California’s decades-long work with China on environmental issues, for instance, has yielded shared research and technologies, plus reductions in greenhouse gas emissions.
The Monitor spoke with Orville Schell, the Arthur Ross director of the Asia Society’s Center on U.S.-China Relations, about the history of California’s international trade partnerships and the challenges in pursuing subnational diplomacy under the Trump administration.
Dr. Schell has written a number of books about China. He also wrote a biography about California Governor Jerry Brown during the governor’s first two terms in office (1975-1983) and has remained close to the former governor. Dr. Schell is a longtime observer of the relationships between California, China, and the U.S.
This conversation has been edited for clarity and length.
What can states accomplish in [our current political] climate with subnational diplomacy?
The Chinese are very artful with friendship associations, with having friendly delegations going over to talk about battery technology or wind generation of energy, etc. But this may contravene what’s going on in Washington.
A state does not have a State Department. A state does not have a foreign policy. A state has no foreign policy experts working for the National Security Council.
Newsom’s efforts on energy, climate, and environment are well-intentioned and needed, but you have to be aware of the big struggles going on in technology. Take battery technology, for instance, and EVs, and microchips. These are things that states might just say, “You want more trade? Fair enough.” But if you’re going to be trading with countries that might end up having some kind of conflict (to wit, Russia’s invasion of Ukraine), you could find yourselves working at cross-purposes with the country’s national interest.
I think everyone agrees China is becoming more and more of a threat. So then, how does California fit into that threat assessment? The way China works is, they’ll take friends wherever they can find them. In business, they love to get into some mayors and have friendship cities and get people going back and forth to show that they’re capable of keeping some connection with America, which is important to them. And the same is true with states. When Gov. Newsom goes there, it’s a big get for China. But is it in the interests of the United States to have that happen? I think that’s an issue someone has to assess properly and judiciously. There may still be a role for states, because you do, where possible, want to keep the door open.
How has California’s relationship with China changed?
Governor Brown’s interest in China was very early, and I think he was curious.
He’s also someone who didn’t feel the ideological contradiction as something [that] might preclude some kind of cooperation as much as some other people did. He was more congenial. He saw these two big powers, two largest carbon emitters, early on and wanted to see if there wasn’t some way that the state, which is the fifth-largest economy in the world, could work together with them. And so he now has an institute at the University of California at Berkeley on climate change that does a lot of work with China.
His second two terms [2011-2019], things had gestated a great deal. And he set up these kinds of exchanges largely through the Energy Commission and largely focused on climate and environmental issues. But he was also interested in trade, and in those years, trade was legitimate.
Since then, the U.S. has slowly evolved into a much more adversarial relationship. So even certain kinds of trade become taboo and controversial, and some impossible.
The virtue of a state, and particularly a big state like California, is it’s influential and like a country. And it has interests around the world that it must maintain through trade and whatnot. However, it also exists in this larger climate of global relations, international relations, which are not something [states] handle.
[The federal government sets] the tariffs, and they have the entities list at the Commerce Department about what companies you can trade with. They are setting rules on incoming and outgoing foreign investment.
Is this political theater, or is there value to California countering Trump administration messaging with its own?
California is just interested in trading with whomever. It’s not the California government’s job to decide what kinds of investments or tech companies are off-limits. So it has to be very, very careful. And it might promote trade, for instance, between Silicon Valley and China. But that would be ill-advised at this point when there are huge controversies going on, [including] the CHIPS Act to limit trade with certain kinds of companies because [who controls the microchip supply chain] is a national security interest.
So it’s quite a conflicted bog at this point, much more so than it was back 20, 30 years ago when there may have been hostility, but we were heading in the right direction of everybody trying to generate more trade. Everybody was for it. It wasn’t controversial. But things have reversed gear now.
Could Gov. Newsom’s enthusiasm backfire if China decides to use him for its own purposes?
That is basically a reality he has to consider. And he wants to be president. And if he looks like he’s a panda hugger and running off with China, disobeying rules or not being mindful of the greater national interest rather than just California’s trade interest, he could be accused of being out of line. So that is a problem.
Newsom has to be careful for himself as a politician and his future because he will get savaged in Washington. But he also has to be careful because he’s an American. He’s a good American, and he’s a smart man. And he does not want to do anything that would put him in conflict with the larger national interests of the country.
Presidents do not like it if big governors go wandering off to countries. Let’s say they wanted to go to Russia or Iran or even to Hungary or Turkey. Is that a good thing? You have to come to your own conclusions.
But states don’t have a lot of policy papers advising them on what to do. In Turkey, is Erdoğan a dictator? Who’s going to say? But maybe you like to buy Turkish honey and Turkish apricots. You see what I mean?
We’re in a world that is falling apart politically. At this point, states that might just want to promote trade – better technical connections to help the environment, that help climate change – very good, very good causes – they have to learn how to be internationalists and to be ever mindful of the role of Washington [in] setting the terms of foreign relations. And they must operate within it.
