Ron Insana: Trump's threatened divorce from China unlikely to be amicable

  • A unilateral break with China means more than just "conscious uncoupling, where the two countries have an amicable split with joint custody over the world economy, Ron Insana says.
  • President Donald Trump threatened to "decouple" the U.S. and Chinese economies, something that sounds easy to accomplish but could have devastating long-term consequences.

Gwyneth Paltrow and Chris Martin may have been successful and "conscious uncoupling," but I'm not sure the same can be said of the U.S. and China.

Over the long Labor Day weekend, President Donald Trump threatened to "decouple" the U.S. and Chinese economies, something that sounds easy to accomplish but could have devastating long-term consequences, not just for the U.S. and China, but also for the global economy, as well.

His comments come as companies, particularly in tech, are getting crushed in recent days.

Certainly, there are other factors affecting high-flying tech stocks that have recently gone "parabolic," but the risk of tit-for-tat retaliation by China certainly isn't helping matters much.

That we are in a very fragile economic recovery, of sorts, makes that threat all the more menacing.

The president also threatened to blacklist China's largest semiconductor company from doing business in the U.S., possibly one of the reasons we saw another sell-off in tech stocks Tuesday.

As I have stated many times in the past, I am sympathetic to taking a much tougher line on China with respect to bi-lateral relations.

China must stop stealing intellectual property by forcing U.S. companies to hand over sensitive technologies as a precondition for doing business there, and should remove both tariff and non-tariff barriers on U.S. products that could be sold in China, among other, and maybe thornier issues, like human rights abuses and other social, political and military behaviors.

Having said that, Trump could have joined the Trans-Pacific Partnership that would have tightened the bonds between the U.S. and non-China Asia, effectively isolating China economically in its own backyard.

Further, the U.S. could have joined with Western allies, rather than going it alone, to bring China to heel on its various trade and non-trade abuses.

But a unilateral break with China means more than just "conscious uncoupling, where the two countries have an amicable split with joint custody over the world economy.

Supply chains would be disrupted. American consumers, addicted to lower-priced goods, sourced in China and sold through the nation's largest retailers, would be hit with an unexpected, and likely unwelcome, sticker shock. Worse, a full-scale trade war at this point in the economic cycle would make the 1930s look like a walk in the park, as global trade collapses and the world's two largest economies sink together.

Why it won't work

While couples' therapy may not help the U.S. and China resolve seemingly irreconcilable differences, a hard split is hardly the answer either.

The president, if he were to make such a move, would have to establish a whole host of programs and incentives to re-establish a manufacturing base in the United States.

He'd need to pay, according to a CNBC guest Tuesday, $24,000 per worker to re-skill the labor force in order to meet the requirements of a radically different workplace that is now focused on on-line retail, cyber-security, 5G, AI, machine learning, EV, autonomous vehicle production, tele-medicine, etc.

Coal and steel are not coming back to bring high-pay, low-skill jobs back to the middle class.

Every married couple considers divorce somewhere along the way. And it's true that China has been less than a perfect mate.

In a still-globalized economy, uncoupling is not something that can be done consciously, let alone unconsciously, without a separation agreement and without a custody agreement that allows for an amicable split.

But in the end, it's not really possible.

On this matter, the president needs some serious counseling from his less hawkish advisors, and from this nation's allies, to make a more equitable, manageable and productive partnership between the U.S. and China. A nasty divorce will only leave the world's children with a future that is not just uncertain but with far fewer options than their parents ever enjoyed.

—Commentary by Ron Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street.

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