The current trade war between the United States and China has become one of the defining features of this year’s news cycle. Tariffs have been threatened, then imposed, and economic changes have followed across the globe. International relations scholars and economists have been seriously considering the relationship between these two great powers, and what changes will occur in the future. The current trade war is a symptom of China’s rise on the global stage and how others, especially the US, deal with this.
The United States and the People’s Republic of China have had a long standing and strengthening bilateral relationship since Richard Nixon’s visit to Chairman Mao in Beijing in 1972. Although relations have been strained at some points since, the trade war has led to an extreme downturn. But how did this situation come about?
As reported by the New York Times, Trump’s goal for starting the trade war was to show China that the US would no longer stand for its “pattern of unfair trade practices and theft of American intellectual property.”
From an academic perspective, Tao Liu and Wing Thye Woo explain in their paper “Understanding the U.S. – China Trade War,” that the Trump Administration’s decisions regarding China stemmed from three elements: China’s large trade surplus, perceived to affect job creation in the US; China using illegal and unfair ways to acquire US technology; China attempting to subvert or nullify US national security.
The Problem with Tariffs
The trade war has led to the mutual imposition of tariffs by the world’s two largest economies. Chad P. Bown and Melina Kolb, who have been keeping track of the Trade War’s progression, reported on April 3, 2018 that the Trump Administration released a list of 1,333 Chinese products considered for 25% tariffs; later stating on July 20 that all Chinese imports would be subject to tariffs.
After the Trump Administration released its list, the Chinese government made a list of their own containing 106 products to be considered for 25% tariffs. This affected imports on US vehicles, aircraft and soybeans. The tactics in this bilateral relationship created an economic tit-for-tat.
While economic logic dictates that the country most severely affected by a bilateral trade war is the country with the trade surplus, in this case China, some believe that there will be no winners. Geng Shuang, Chinese foreign ministry spokesman, believes the US and China should be able to communicate in a way that is “conducive to mutual understanding and cooperation.” He is in opposition to the “zero-sum” mindset that the US government wants to pursue.
As Bown and Kolb’s report demonstrates, tariffs have severely impacted the steel and aluminium trade, dragging other countries into the dispute. On March 1, 2018, Trump announced that tariffs on these materials would cover $48 billions of imports that would ultimately affect Canada, the European Union, Mexico and South Korea. The European Union responded, filing a formal dispute with the World Trade Organization, while stating that it would also impose its own tariffs on Harley Davidson motorcycles and blue jeans.
As tariffs are being imposed on China, manufacturers will have to adapt quickly. There is precedent for this – in the past, when the US imposed tariffs on China and Taiwan’s solar imports, these products were imported then from Malaysia, Singapore, South Korea, and Thailand.
In recent months, Jack Ma, chairman of Alibaba, has warned that China may see more businesses relocating overseas, adding that retaliation against Washington will continue to negatively impact China – “you may win the battle, but you may lose the war,” he said, before predicting that this particular dispute could last for years.
Beyond the “Tariff War”
Although the tariffs are of major concern, technology is also a bitter bone of contention. CNN reports that Beijing has in the past insisted that US must transfer their technology to Chinese partners if they want to sell goods in the Chinese market. Although, this has been happening for years, the US government seems to care more now as the technology China requires is seen to be ground-breaking and revolutionary.
Made in China 2025 is a government initiative aimed at “transforming the country into a hi-tech powerhouse that dominates advanced industries”. As Lorand Laskai reports for the Council on Foreign Relations, China plans to achieve its goal through foreign acquisition and forced technology transfer agreements.This is something that has clearly perturbed Washington.
In the last few days, the Washington Post pointed to a thaw in relations after Trump and Xi dined together at the G20 Summit. Trump agreed to cancel the planned January 1 tariff increase on Chinese products in return for “very substantial” Chinese purchases of American agricultural and industrial products. Many speculate that Trump backed down after seeing heavy fluctuations in the stock market and losses for General Motors. With eyes on reelection in 2020, he will want to ensure that the economy is running smoothly until then, a fact Beijing could use to its advantage.
So for now, the two countries may see the benefits of cooperation, but there are larger questions looming on the horizon.
China’s Rise and the Liberal World Order
What has been demonstrated in this piece is the US-China trade war is not just about the economy of these two nations: it is about role changes in the global political sphere. In the 1990s Chairman Deng Xiaoping offered the following advice to his political successors: “hide your brightness, bide your time”. He saw China’s rise as possible, but also recognised that it benefitted greatly from the existing system of world order and could only continue doing so if other countries were not threatened by it.
This changed drastically with the rise of Xi Jinping as Chairman of the People’s Republic of China, who in 2012 coined the term “new type of Great Power relations.” This was meant to demonstrate that China would be moving to the forefront of global politics. Xi’s administration has seen the promotion of the “China Dream” and “community of common destiny” which emphasise China moving towards having a hands-on role in global politics, creating networks with other countries, and having more influence as China’s economy continues to grow. China no longer wishes to stand on the sidelines as others govern the globe.
Scholars are now having to ponder the effects of China’s rise on the current liberal world order. Riccardo Alcaro has defined the liberal world order as being based in values, norms and rules that countries should all follow, which also guide the creation of institutions that countries should participate in.
The rules that Alcaro discusses have been guiding politics for years, and include internationalism, multilateralism, regionalism and interdependence. But these may begin to change as countries that had little say in the creation of this system become more powerful.
Many Western powers believe in a universal system of values, and presumed that China would rise while succumbing to established rules of modernisation created by the West. However, Beijing has shown that it can use its own system of government, international relations, and economics to further its development.
With the current trade war pitting the US against China, international relations enthusiasts are witnessing a dramatic turn of events. The US needs China as much as China needs the US. Xi Jinping’s assertiveness and Donald Trump’s cavalier approach have made the world’s most important political relationship decidedly tempestuous, which is all the more concerning when the stakes are so high.