How Trump’s China trade war plays out in one Pa. congressional race
Montgomery County's Fourth Congressional District race highlights sharp differences over China. The Republican wants to punish the Chinese with tariffs for years of technology theft while the Democrat calls tariffs dangerous. Her husband's firm imports bicycles from China.
The vast China-U.S. economic relationship is now unraveling, or at least moving into a more perilous phase, with President Trump boosting tariffs on Chinese imports while China leader Xi Jinping steps up authoritarian moves involving the military, the economy and politics.
The China conflict and the political and economic issues it raises can hit surprisingly close to home. Consider the Fourth Congressional District in Montgomery County.
The Republican, Dan David, who investigates Chinese stocks for a living, has for years urged Congress and the SEC to retaliate against China's government-backed frauds on Americans. For him, the administration's confrontational attitude is overdue.
David is an investment-company founder who specializes in Chinese stocks. His efforts to get lawmakers to fight what he calls widespread, government-aided Chinese business fraud against U.S. companies are detailed in the 2017 movie The China Hustle. His harder line, which not long ago seemed at the hawkish end of views, looks mainstream under Trump.
Democrat Madeleine Dean, a Pennsylvania state legislator, argues that Trump's tariffs are part of a dangerous policy, threatening American employers who have come to depend on Chinese imports. Which includes her family's business.
Dean's husband is an importer of China-made bicycles and an outspoken critic of Trump bike and bike-part tariffs. "It's her husband's business, not hers," says Timothy J. Ford, a lawyer at Obermayer Rebmann Maxwell & Hippel LLP, who is helping the candidate. The couple's positions align.
Dean expanded and corrected her Financial Disclosure Statement with the U.S. House of Representatives — where she hopes to serve — after I reported her previous filing lacked required information about her family's largest single investment, in a private firm called Jadeland Pacific.
Jadeland is now listed as an "international bicycle distribution" company. Dean's husband, Patrick Cunnane, is its chief executive officer. Jadeland is based in the British Virgin Islands, a U.K. colony described by international groups as a tax haven. Dean now says her family controls 24 percent of Jadeland, not the 20 percent she initially reported. "Just an error," says Ford.
Jadeland distributes Fuji bicycles and other brands, which are imported, mostly from China, and sold in the U.S. by other companies that Cunnane heads. Fujis are made, mostly at a plant in Dongguan, Guangdong, by Ideal Bike, a Taiwanese company whose owners, Chang Pen-Tsao and Hermes Chang, have invested millions in Cunnane's companies over the years.
Who are Jadeland's other owners, besides Cunnane? "That is not part of the requirements" for a candidate disclosure, Ford said. "You just have to disclose the partnership." Not who's in it.
Ford was more interested in talking about David's disclosure report. He noted that David listed private investment firms CenterPoint Trading and FG Alpha, but did not detail assets they may hold. Dean added more details on Jadeland, Ford said, and argued that David should do the same.
"My CenterPoint account is a personal trading account," and currently all-cash, so there's no company holdings to report, David told me. He said he has also reported income from FG Alpha, but isn't required to report trading positions — which, he added, change fast, and whose disclosure could endanger the value of an investor's position, and give the China companies sensitive information.
Jadeland and Cunnane's other companies have prospered with U.S.-China trade. Where does Dean stand on the Trump tariffs, which threaten that trade by boosting the cost of the China import bikes that dominate U.S. sales?
Dean's campaign manager, Koh Chiba, referred me to Dean's posted statement, which, like Trump's and everyone else's, calls for "fair" treatment of U.S. businesses and workers, and holding China "accountable" for trade abuse. More tellingly, she criticized Trump's "inconsistent and unstructured trade policies," which "threaten to set off an international trade war, that will harm our economy and American producers."
Is Trump's China policy "inconsistent" or "unstructured?" The New York Times on Oct. 5 said the strategy was finally coming into focus although there was no guarantee it would work: The Trump administration "is embarking on a Cold War" to limit China's aggressive moves, with tariffs as a weapon.
Economist-investor Ed Yardeni wrote in his daily newsletter Tuesday that Trump is clearly aiming at "slowing or halting China's drive to become a superpower. He wants to reduce America's huge trade deficit with China by forcing U.S. and other manufacturers to move out of that country" and reduce China's illegal acquisition of U.S. technical know-how.
Yardeni notes this was a focus of Trump's Sept. 25 speech at the U.N., though headlines focused more on delegates laughing at the President.
Days later, Yardeni writes, Vice President Pence, at the conservative Hudson Institute in New York, laid out his government's China program "in far greater detail," targeting China's investment and trade practices, as well as its illegal base-building in the South China Sea, influence-buying abroad, and repressive "social credit" scoring of China citizens. So, higher tariffs.
But are bikes a likely target? Or are they collateral damage, unfairly lumped with strategic goods and tech that the U.S. needs to control?
Dean's attorney sent me Cunnane's testimony at the International Trade Commission office in Washington on Aug. 28, where Cunnane joined other U.S. importers and retailers of China-made bikes, guns and other sporting goods in urging Trump not to follow through with tariff hikes.
After years of tough price competition and U.S. plant closings, American-built bikes account for just 6 percent of bikes sold here (and 3 percent of kids' bikes), Cunnane said.
The pay differential between the two countries is huge: Ideal's China factory pays $2.20 an hour, a fraction of the $15-plus that Dean says American employers ought to pay, as I reported last month. Trump's idea is that boosting tariffs to 25 percent of the cost of a containerful or shipful of China imports will boost their cost and price, so it will become more attractive to make them in the U.S. again.
But Cunnane doesn't believe tariffs will bring back U.S. bike factories. The cost gap is so wide that even with tariffs, "domestic manufacturing" for the mass market is "not realistic, and pretending otherwise is dangerous." Bike retailers will still import bikes, but at higher costs, maybe sourcing some from smaller Asian countries, he emailed later.
Yet Cunnane and his fellow importers aren't against all tariffs, just the ones that cost them. They want Trump to kill the current small-purchase tariff protection that exempts Americans' single-bike purchases online (under $800), which are tariff-free from competitor websites, such as China-based Alibaba.
It's not fair to store owners such as him, he said, that U.S. consumers can buy bikes cheaper online from China, when U.S. retailers like him have to charge or eat tariff costs for the same bikes. "China cheats," he added, noting that some web-purchased bikes are counterfeits that give import brands a bad name.
Is it even possible to have a nuanced policy that pressures China on military, political, and tech fronts, while still protecting importers of cheap goods? David is professionally skeptical. Dean sees reasons to believe.