The Chronicle of US-China Trade Wars

 In Andrei Korobkov, China, HomepageSlider, International & Transnational Affairs, TPF Analysis, Trade War, USA

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Sino-US trade wars will continue as long as Donald Trump remains in the White House. At the core of it all is Trump’s China policy – “weakening China is the main goal of his foreign policy”. Trump is seen by the American elite (quite rightly) as a systemic threat. The elite’s hatred is now such that it is ready to accept almost any provocation against the president, including causing serious damage to the US economy. Andrei Korobkov, professor of political science at the University of Middle Tennesse says – as the U.S. elections draw near, we will surely see attempts to thwart agreements between the administration and the Chinese leadership, provoke tariff wars, and destabilize markets and contribute to the onset of a recession.

The Sino-US Trade War saga will continue as long as Donald Trump remains in the White House. There are both strategic and tactical aspects in US President’s Chinese politics. The weakening of China is a key element of its foreign policy concept – in the form in which it was formed by Steve Bannon. In 2017, Bannon, in particular, said (in an interview with ‘The American Prospect’): “The economic war with China is all. And we should be maniacally focused on this. If we continue to lose it, then I think in five, at most ten years, we may reach the point after which we will not be able to recover … One of us will become the hegemon within 25 or 30 years. And it will be them if we get stuck on this path. ”

Based on this, Trump’s foreign policy is primarily focused at creating a set of measures aimed at containing China, and includes the transfer of the center of gravity from the North Atlantic to the Pacific basin, the formation of a new alliance structure there and the development of cooperation with Russia so that, at least it will prevent the formation of a military-political union of the Russian Federation and China.

In the economic sphere, this implies a weakening or even destruction of the structure of the WTO . Trump believes that the free trade system turned out to be much more favorable for China than for the United States, and allowed China to destroy the real sector of the American economy – and this, in turn, led to the formation of a huge deficit in US trade with China. In this connection, Trump is ready to even take measures that would hit the US economy as well, since, in his opinion, these are necessary for maintaining the current balance and can hurt China more than the United States.

At the same time, Trump is tactically trying to achieve certain goals in both the economic and political spheres. Politically, he needs to maintain and even strengthen his support for voters in the old industrial and agricultural states – such as Wisconsin, Pennsylvania, Michigan, demonstrating his determination and commitment to protecting traditional industries and agriculture. It was the outrage of the electorate against the “free trade” policy of traditional cosmopolitan elites that ensured Trump’s victory in these states that traditionally supported the Democrats.

Economically, Trump, positioning himself as a defender of the interests of the real sector of the economy, medium and small businesses, is constantly pursuing a line of “bargaining” for more favorable conditions for US economic exchange with China. At the same time, he continues to behave as he did when he was a big businessman. Therefore, his strategy involves the endless creation of tension and crises with the negotiation partners, including China, by constantly  making new demands, often right after the previous conflict has been successfully resolved. This policy will continue until the end of his presidency.

This is not to say that this policy is not yielding results; on the contrary, they are very impressive. For example, the US trade deficit with China, which amounted to more than $ 400 billion in 2018, has now reduced to less than 200 billion – a reduction of more than 2 times! This leads to a reduction in the balance of payments deficit, a key problem in the American economy. China was forced to expand imports of American goods and more consistently comply with the “rules of the game” when trading with the United States.

Nevertheless, such a policy carries a number of serious problems and contradictions. First of all, the constant threats of tariff wars create nervousness in the market, increasing its volatility. An increase in trade tariffs, if it does happen on a large scale, will lead to a significant increase in prices for consumer goods, which will inevitably hit consumers – who are also voters – and this may affect the results of the November 2020 vote. This, by the way, is a key problem for the United States in its relations with China, regardless of who occupies the White House. The American elite, operating on the basis of two-year election cycles, finds it very difficult to build a long-term strategy for a country whose elite can plan policy for centuries. Trump, as a political outsider and a very rich person who cares little about his long-term political career, is much more free and can afford in this regard much more flexibility and integrity than traditional political careerists.

However, the president also faces other challenges. Firstly, the Chinese leadership has long understood Trump’s strategic as well as tactical goals and methods. Accordingly, their effectiveness will decrease over time. At the same time, China is not like the European countries whom Trump increasingly treats more like client states, and less as equal partners. The scale of the economy also plays a role, as does the overall dynamics coupled with national and civilizational pride. Suffice it to recall that in early 2016, China accounted for 14.8% of global GDP, while the share of the United States  was 24.3%, and Russia’s share was only 1.8%.  It is pertinent to note that the growth rate of the Chinese economy continues to be more than 2 times that of the US, and hence, its share of global GDP continues to increase while that of the US been in a slow decline.

It is most likely that China will call Trump’s  bluff, and the US president will have to decide whether to raise tariffs and start a real trade war, or lose face, giving way unilaterally. This moment is just around the corner – tariff increases have been postponed to December 15, as many American retail chains and especially small private stores receive more than half of their annual revenue during the two holiday seasons – before Thanksgiving in late November and Christmas in late December.

We cannot ignore the fact that Trump is considered by the American elite (quite rightly) as a systemic threat – the political establishment, the elite press, show business, academy and essentially transnational financial capital and hi-tech businesses are against his methods. The level of hatred of the elite is now such that it is ready to go for almost any provocation against the president, including causing serious damage to the US economy. Therefore, it is possible that we will see attempts to hinder the achievement of agreements between the administration and the Chinese leadership, provoke a crisis in bilateral relations, including tariff wars, as well as destabilize markets and contribute to the onset of a recession.

As elections approach, both tensions in bilateral relations and elite attempts to provoke a similar crisis will increase. But the fact remains that reformatting relations with China is a tactical and strategic objective for Trump despite his pressure tactics. At the same time he is keen to prove that, unlike professional politicians, he always fulfills his campaign promises. Effectively, this means that Trump will stubbornly press on with his China policy.

Andrei Korobkov is professor of Political Science at Middle Tennessee University. He is non-resident Distinguished Fellow at The Peninsula Foundation. Views expressed are the author’s own.

A version of this article was published earlier with Valdai Discussion Club www.valdaiclub.com

Image Credit: Flickr – Creative Commons

 

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