Issue: 2023: Vol. 22, No. 2

Smart Rabbits: American Small Businesspeople, Trade Wars, and the Future of U.S.- China Relations

Article Author(s)

Douglas Barry

Avatar photo
Douglas Barry counsels small and midsize U.S. companies on international market entry strategies. He teaches reputation management at the George Washington University and was vice  president at the U.S.-China Business Council. He received a doctorate in education from Columbia University. 
2023: Vol. 22, No. 2
Newsletter Signup
Subscription Form

Print Friendly, PDF & Email

There is a Chinese proverb about a smart rabbit, 狡兔三窟,jiǎo tù sān kū in Mandarin. A smart rabbit has three burrows. If one is endangered or destroyed, the rabbit can seek safety in the other two. The story was shared by Jim Wu, an entrepreneur who has created many businesses since leaving China for Texas many years ago. His businesses have created jobs for fellow Americans.

Wu worries about the future of the bilateral relationship, and about his status as a Chinese American at a time when it may not be safe to be one. He hopes for the best but prepares for the worst. He has a plan. In fact, he has three plans – A, B, and C – just in case. These plans consist of staying in the United States, creating different businesses that don’t involve China, or moving his family to a third country that is more open to trade and is friendlier to Chinese Americans.

The rabbit metaphor suggests adaptability, flexibility, persistence, and pragmatism – characteristics that Wu and thousands of Americans display in their dealings in and with China. These smaller businesses may not form the backbone of the commercial relationship, 51 years after President Nixon’s dramatic visit. But they arguably comprise key vertebrae that now support several million jobs in the United States and helped maintain a half-century of now-tenuous peace between nuclear-armed superpowers.

Our Smart Rabbits are not emotionally neutral about current tensions between the United States and China, which include a trade war, bellicose rhetoric, accusations about the origin of the COVID pandemic, alleged slave labor in Xinjiang, many pieces of U.S. legislation seeking to restrain and punish China, “blacklists” of sanctioned people and companies, growing nationalism in China, spy balloons, China’s relations with Russia, moves to force the popular TikTok social media channel to sell to American buyers or shut down in the United States, even threats of war over Taiwan.

These businesspeople overwhelmingly oppose decoupling, or significantly reducing trade between the world’s largest economies. Their solution is to increase trade and people-to-people exchanges with due respect to matters of national security. They want to keep working the trade channels and people-to-people connections while governments work harder on other problems bedeviling the relationship – and there are plenty of them.

These business owners speak of a middle way that deliberately avoids extreme positions: loving China whatever it does, or treating it like an existential adversary, closing national borders and minds to keep goods and people out. Rather, they engage with Chinese customers and suppliers as Americans who follow America’s laws and support American values. They earnestly believe that their engagement with Chinese counterparts improves worker rights and human rights generally by the way they treat their own employees and, if they have them, their Chinese employees. They rightly bristle when referred to as naïve or unpatriotic.

These businesses see two parallel realities. One is that China is uniformly bad and needs to be opposed and separated from. The other is that China is an important trading partner, generator of American jobs, profit center, muse of global competitiveness for American corporations, and indispensable partner for dealing with existential threats facing the world. Today, the dominant narrative is that China is a menace and an implacable adversary. The businesses see this perspective as detrimental to their companies and their desire to see better bilateral relations, or less bad than they are today.

“Bad China” was the target of former President Trump’s tariffs cum trade war and President Biden’s continuation of them despite substantial evidence they do not work as promoted. President Biden admitted as much during the election that put him in the White House. But as of this writing, the tariffs are still on despite reports that they have cost U.S. businesses and consumers $125 billion and counting over three years and increasing by $3 billion each month. Smaller businesses have suffered from the added tariffs more than larger corporations, which have much deeper pockets and myriad ways of making money.

A U.S.-China Middle Way for Smart Rabbits and Their Elected Representatives

The businesspeople who contributed personal reflections for this article share six common perspectives on the need to find a middle ground between the opposites of “Bad China” and “Good China.” 

First is the belief that trade with China is important and that a headlong rush to decouple will damage the economies of both countries and the world. 

Robert Fisch, a business consultant with offices in Florida and Shanghai, said: “A major rupture between these two great powers would be very destabilizing for the world. One of the major concerns is not COVID-19 or trade policy, but rather the war of words, which does not help either side.”

Fisch added: “Look, I’ve lived there for decades. I feel part Chinese. I don’t want bad things to happen.”

 

George Wang owns a contract manufacturing business based in Oregon and is a native of China. He said: “The U.S. is worried about China’s influence around the world, which in time could change how the influence game is played. I don’t want to see confrontation take place in my lifetime. Mutual understanding should be sought through increased collaboration and communication.” 

Inna Prikhodko, who owns a South Carolina business that helps Chinese hospitals source pharmaceuticals from the United States, said: “I think about this problem all the time. Every year I am still open for business, I am grateful. If President Biden decides not to trade with China, we’ll have to find something else to do.” 

Second is the belief that trade can and must be conducted even amid disagreements about other issues, such as human rights or who has the better political and economic system. A “middle way” is needed that avoids being reflexively for or against the people and leaders of the other country.  

Kimberly Kirkendall, who operates a consultancy in Ohio with clients in China, said: “The labels are extreme. Either you are a pro-China mouthpiece of the Communist Party, or you hate China. The truth is usually in the middle, but it is getting harder to walk the middle. I try.”

Part of trying involves speaking to college students, Kirkendall said. “I want people to think critically. I tell students that the policy of the U.S. government has been to contain China. I ask students to flip that. If China or Russia were saying their goal is to contain the U.S., how would you feel? It’s important to understand the other side of any argument. Challenging our own perspective is largely missing from official discourse, and I’m constantly amazed by the fuzzy thinking I confront.”

 

Other contributors, including David Mathison, owner of a furniture cover manufacturer in North Carolina, agree about the fuzzy thinking. He said: “There is no way [the U.S. government] could make a case that making leather in China using U.S. materials undercuts the industry in the United States. There is no leather-making industry in the United States. We sell upper-end products, and we can only do that by working in China.” 

Third is a belief that business is a force for good because it strengthens individual relations, improves mutual understanding, and creates broad economic benefits by transacting with others. 

Chinese American business owner Jeff Ji of Philadelphia with clients in China said: “You have to have the fixer, the matchmaker, the cultural translator. Keep trying to build strong relationships. Many of our politicians have never had to make a payroll. They don’t get it. Americans and Chinese have built many useful relationships. It will be a disaster for all of us if they are systematically broken.” 

Fourth is frustration with governments who are overly antagonistic toward each other and largely dismissive or ignorant of the economic and informal diplomatic roles played by smaller companies and their support systems.

Longtime China entrepreneur Mitch Thompson of California is one of the few Americans we talked to who is planning to give up on China after years of working there, learning the language, and marrying a Chinese woman. He said: “In China, the role of the foreigner is not useful anymore. It’s shocking how closed China is right now. It’s much more than COVID. COVID is an excuse.”

Mathison, the furniture covering manufacturer, is one of the few small businesspeople who have testified before Congress. He was dismayed by the experience. “I was totally shocked. The members weren’t really interested in what the answers were. They requested a statement in advance of the hearing, but instead of discussing the points outlined in that statement, they requested it just be read. I was disappointed and disgusted to have to sit through that as an open hearing.”

Fifth is the sense of disappointment bordering on sadness that many of these entrepreneurs feel as they contemplate decades of work learning languages, traveling back and forth — all coming to naught because of geopolitics and extreme attitudes.  

Dan Digree is a loudspeaker maker whose products are now more expensive than foreign competitors because of the Trump-era tariffs. He said: “I’m very disappointed that the Biden administration hasn’t taken time to look at the China trade policy from the perspective of small business. With all the supply chain disruption happening, I’m very angry that the government hasn’t dealt with it or provided any help. The dangerous state of U.S.-China relations is an existential threat to many small businesses.”

Utah businessman Dan Stephenson, a Chinese speaker who wants Utah school kids to study the language, said: “We need a politician who will stand up and say: ‘China has the biggest middle class in the world, and they are ready to buy stuff from our state.’ If state legislators understood more about how China works and could distinguish legitimate concerns from fear-mongering rhetoric, it would be a real boost for both sides.”

Paul Swenson is Asia director for Wisconsin-based AMSOIL Industrial, a maker of lubricants for wind turbines. He said: “The relationship has long periods where things are good followed by periods when they’re not; it is like being married. The current bad patch may be part of this pattern, but it could also signal a change in direction. China is my second home and I’m deeply worried that one day it might not be as welcoming for foreign companies. 

“I believe we Americans must keep a strong hand on what is right and wrong and what our values are. But does it make sense to end our business relationships after we’ve invested so much? Does it make sense to throw money down the drain on tariffs? There must be a better way.” 

Jeanne DeMund, founder of Seattle-based Echo Products, has done business with China for several decades. She observed: “Caving in to China’s demands will not get us anywhere. But we need a calm, reasonable series of interactions to lower the temperature as much as possible. Draw on old relationships that do exist: the NGO relationships, the universities, the diplomatic relationships, the people-to-people relationships. We really need to work this out because it’s in our best interests.” 

Last is a sense of guarded optimism that common sense will prevail, and the two countries will arrive at a place where important areas of bilateral cooperation can coexist with profound disagreements. Should this not be the case, additional homes will be needed for our Smart Rabbits. 

Jacob Cluver, founder of a custom-bred pig company in Illinois, said: “China is at the point where they need to develop outside the big cities and coasts. Rising incomes mean higher demand for better quality food and other goods. It would be foolish for the U.S. to quit China now.” 

David Halm, a project manager for Georgia-based Project Success, said: “I hope to be doing business in China 10 years from now if the governments can figure out how to coexist. I’m optimistic about a change, but it will require strong leadership to find a solution that is best for the American worker and consumer. It has to be more than just a masquerade.” 

Added Robert Fisch, the Florida and Shanghai business consultant: “Things in China tend to happen in waves. China will open, then crack down a bit, then open and then crack down. I’m hopeful that the opening part of the cycle is not too far off in the future. While there is much saber rattling and posturing, I’m still bringing on new clients, including a large online and brick and mortar company for different verticals that just got $400 million of funding.” 

Thomas Biju Isaac, founder of Oregon-based Allied Technologies, said: “I’m an optimist. Things will get better. But we will pivot, doing more automated design and production in the U.S. We expect China and India to grow, even faster than the U.S. – and we’ll be there, too.” 

Jimmy Robinson is a founder of New York-based PingPong Digital, which helps American universities recruit Chinese students. He said: “The instability in the relationship we’re seeing now is likely to be short-lived, as China will likely start to return to more stabilizing policies prioritizing trade and business. They have a lot of optimism and hope. And so do I.

 

“A major rupture between these two great powers would be very destabilizing for the world. We need more and more, rather than less and less, communication. Active dialogue and engagement rather than just propaganda going back and forth.”  

Robinson added: “A country that is the second largest economy in the world, we will always have a business relationship with China.  I don’t think you can have a complete decoupling. It doesn’t make sense in the board rooms or the legislatures anywhere in the world.” 

Other business owners see the glass as half empty: Business relations will continue at some level, major improvement will not be possible without major changes in both counties. Mitch Thompson, the entrepreneur from California, said: “The magnitude of trade will be enough to hold things together for my business and for many other Americans. But culturally we’ve never been further apart, and I’ve been going there for many years. About the relationship improving, I’m about as hopeful as I am about us having elections in the future without significant violence and chaos. Little hope for improvement with the current regime there, politics here. Very sad.” 

The discovery of a middle way for policymakers is necessary to achieve progress on the diplomatic front. A first step is to realize that radical uncoupling is not desirable or even feasible, then identify and ring-fence those areas where cooperation can flourish. The stories collected for this article include ample examples of poorly conceived policy, especially tariffs, producing poor results.

Recommendations to Help Smart Rabbits

Weeks have passed since Presidents Biden and Xi last talked. Meanwhile, bad blood between the two countries continues to flow. There are steps that should be taken now to ensure that trade and people-to-people relations can continue while larger geopolitical issues play out. Nothing can be taken for granted as the constituencies for even modestly resetting the bilateral relationship remain in the minority.

Direct support for small business

  • Lift the tariffs set in place by President Trump. If for some reason the tariffs can’t be lifted, the U.S. should expand the tariff exemption program and make it easier for smaller companies to apply. If an application is denied, the reason should be shared with the business along with advice on how to become eligible. Tariffs disproportionately harm small businesses and lower income people.
  • Redouble efforts to boost sales of U.S. products, especially from smaller and minority-owned companies, through China’s $3 trillion per year e-commerce marketplaces.
  • Increase support for government programs that help U.S. companies export to China. Encourage the Chinese government to appreciate the role played by U.S. small businesses and their supporting ecosystem in building the bilateral commercial relationship.

Federal policy

  • Take small business into account when making trade policy. Carefully listening to their concerns will help avoid polices such as tariffs that inadvertently harm U.S. business. As David Mathison, the North Carolina furniture cover manufacturer said: “Why does the U.S. tariff leather from China when there’s no leather industry in the U.S. to protect?”

-U.S. and Chinese leaders should meet frequently and talk face-to-face about differences. Issuing press statements is no substitute for diplomacy.

  • Push China to complete its purchase of U.S. goods under the Phase One Agreement and shift immediately to negotiating a Phase Two involving the removal of structural barriers to trade.
  • Create a rapid dispute resolution process that both countries can use. This was envisioned in the Phase One Agreement but never fully implemented.
  • Resume and increase people-to-people exchanges as soon possible. Continue to welcome students from China to our college campuses. Many Chinese students contemplating study in the U.S. say they no longer feel welcome and have accepted placements in the UK, Canada, and Australia. The Chinese side needs to reduce ad hominem criticisms of the United States and American culture, realizing that students populate an important bridge between cultures and set the stage for future cooperation.

State policy

  • Continue to support small and midsize businesses to do lawful business with China.
  • Avoid harmful legislation such as prohibiting the sale of agricultural land to Chinese nationals just because they are Chinese nationals.
  • Welcome Chinese students to private and public universities. Resume outward and inward trade missions as soon as possible. Continue to sponsor state trade delegations and welcome Chinese investment that creates jobs.

-Hold regular conversations with Congressional representatives in order to promote balanced and reasonable trade policy with China.

Overcome negative perceptions

  • Expand programs for workers and families who have suffered disproportionately from job losses regardless of cause. Improve and expand job training and retraining, which was proposed by the Biden Administration in 2022 but stalled in Congress.
  • Make trade and global competitiveness a national priority again instead of a subject to be downplayed or avoided. Work to improve economic literacy in schools so that Americans have an informed foundational knowledge of how the national and world economies work. Critical thinking skills are needed to prevent the pernicious effects of groupthink and the seductive untruths magnified by social media.
  • Support immigration reform so that STEM workers can more readily enter the United States. The need for this expertise is widespread and includes many smaller companies that make products to sell to global customers. Congress has kicked this can down the road for years. Now the government wants to provide support for the semiconductor industry but finds we do not have the skilled labor.
  • Acknowledge the need for more and smarter diplomacy going forward. Key supply chains involving solar panels and electric vehicles, among other technologies, are controlled by Chinese companies, which have leads of many years. It will not be possible, perhaps for decades, for the United States to become exclusive producers of these components and finished products. California will ban internal combustion car engines by 2035, and China will be needed to provide batteries for replacement vehicles. This requires trade agreements, which would be difficult to negotiate in the diplomatic climate that exists today.
  • Continue to push China to level the playing field for foreign businesses by improving market access and limiting distortive industrial policies.
  • Narrow the scope of national security issues – on both sides – to avoid unintended consequences to trade and investment. Both governments should also look for areas of cooperation around global public goods such as climate and public health.

Long Nights Journey into Day

The United States needs to remain engaged with China. In large part, this involves people-to-people contact and the satisfaction that comes from connecting with people different from yourself. Commerce is one way to develop and sustain connections. The exchange of things is an activity that has occupied humans since dim antiquity. Even today, in the most remote corners of the world, people gather at dusty roadsides to buy, sell, and socialize, having figured out systems to weigh, measure, and price. As humans, it’s harder to kill those you do business with, although the old notion that “when goods cross borders armies don’t” has been repeatedly disproved.

Our Smart Rabbits – and their counterparts in China – face challenges everywhere they look. Where will their next metaphorical home be? How will they get there and what will they need to make the journey safely? They have been working on the U.S.-China relationship for half a century, and both countries have been lucky for it. It wasn’t only big government and big American corporations that did the trail-blazing. Thousands of Americans made this journey. Many Chinese have also made their own journeys, navigating a different culture, values, and political system. It is in the interests of both countries to ensure that they do not end up in a dead end.