So let's see whether we can come back with a winning strategy. What would that look like?

First, let's repeat, at the highest level of state, to our Chinese, Japanese and German friends what they already know. If they want unhindered access to keep selling in U.S. markets, they have to step up purchases of American goods and services in a way that would keep narrowing the bilateral trade imbalances. They could get the same result by dumping on somebody else while buying more from the U.S.

It's worth repeating that reasoning because I simply cannot believe the story that this was tried and failed — thereby leaving tariff warfare as the only solution to U.S. trade policy.

The Chinese know that their U.S. surpluses are so huge, and growing, that they represent for Washington an issue of national security — arguably of the highest order.

So, a renewed negotiating effort might be advisable. But if it turns out that the Chinese refuse a prompt resolution to the trade problem, then Washington will regrettably have to deal with something much more serious than a trade deficit with Beijing.

The imbalance with Japan, an ally, should be much easier to solve. In fact, an agreement with Tokyo, and the one reached earlier with Seoul, could be used to show China how trade disparities are reduced while preserving constructive economic relationships. Washington's close alliances with Japan and South Korea could also serve to induce a more cooperative attitude from China.

Similarly, a quick agreement with a German-led EU would be essential as another example to show Beijing that its hugely unfair trade advantage with the U.S. must end.

The second set of measures should focus on structural changes to substantially raise the U.S. economy's potential and noninflationary growth. The central issue is the stock and quality of human capital. Efforts at promoting the level of general education and vocational training would be central to bringing back into the labor force some of the 95.6 million people who are becoming unemployable.

Much better progress is being made on the buildup of physical capital. The recent tax reform, improving sales outlook and a search for productivity gains, lower costs and higher profits are the main drivers of the structural change that will eventually contribute to lifting current limits to noninflationary growth.