Averting a Chinese-American trade war

IN 1784 the Empress of China set sail from New York, on the first American trade mission to China. Carrying ginseng, lead and woollen cloth, the merchants aboard dreamed of cracking open the vast Asian market. But the real profit, they found, came on their return, when they brought Chinese teas and porcelain to America. As other ships followed in its wake, the pattern became clear. Americans wanted more from China than Chinese wanted from America, and the difference was made up with a steady outflow of silver from America into China. The Empress had launched not just commercial ties between the two great countries but also an American deficit in its trade with China.

The modern incarnation of this deficit is still driven by the flow of consumer goods, but nowadays electronic gadgets. In recent years it has reached a record size (see chart 1). When Xi Jinping, China’s president, meets Donald Trump...