The Chronicle of US-China Trade Wars

The US-China trade wars will last as long as Donald Trump remains in the White House. Trump’s policy towards China has both strategic and tactical aspects, but weakening China is the main goal of his foreign policy as it was formulated by Steve Bannon. He said ( in interview to The American Prospect in 2017 ) that to him, “the economic war with China is everything. And we have to be maniacally focused on that. If we continue to lose it, we’re five years away, I think, ten years at the most, of hitting an inflection point from which we’ll never be able to recover… One of us is going to be a hegemon in 25 or 30 years and it’s gonna be them if we go down this path.”

Therefore, Trump’s foreign policy is focused on developing a package of measures to contain China, shifting the center of gravity from the North Atlantic to the Pacific, creating a new mechanism of alliances there and developing cooperation with Russia, so as to at least prevent the creation of a military-political union of Russia and China.

In the economic sphere, this provides for weakening or even destroying the WTO. Trump believes that the system of free trade is much more favorable for China than for the United States and that it allowed China to destroy the US real economy, which has created a huge deficit in US trade with China. In this connection, Trump is ready to take measures that would hit at the US economy as well, because he believes that these measures are needed to maintain the current balance and can be more painful for China than for the United States.

Simultaneously, Trump is taking tactical measures to attain his goals in the economy and politics. In political terms, he needs to preserve or, better still, strengthen voter support in the old industrial and agricultural states like Wisconsin, Pennsylvania and Michigan by demonstrating his resolve to protect the traditional sectors of industry and agriculture. It was the traditional cosmopolitan elites’ resentment of the free trade policy that brought Trump to victory in these traditionally pro-Democratic states.

Economy-wise, Trump, who claims to be defending the interests of the real economy and small businesses, continues to bargain for more favorable terms of US-Chinese economic relations. But he is doing this like the big businessman he used to be in the past, which is only increasing tension and creating more crises. He makes ever more demands on his negotiating partners, including China, often immediately after settling a conflict. He will pursue this policy until the end of his presidency.

It should be said that this policy has produced impressive results. For example, US deficit in trade with China has been cut from over $400 billion in 2018 to less than $200 billion now. This is reducing the US balance of international payments, which is the biggest problem of the US economy. China had to increase US imports and to play closer to the rules in trade with the United States.

At the same time, there is a negative side to this policy, which is fraught with serious problems and conflicts. First of all, the threat of tariff wars is creating nervousness on the market and increasing its volatility. If Trump ups the ante by further increasing tariffs, this will hike consumer prices and so hit back at the consumers, who are also voters, which can have a negative impact on voting results in November 2020. This is America’s key problem in relations with China, regardless of who is the boss in the White House. The American elite, which is operating on the basis of two-year election cycles, finds it very difficult to formulate a long-term strategy towards a country whose elite can plan for centuries ahead. As a political outsider and a man with huge personal wealth, who has no plans for a lasting political career, Trump has more freedom of action and can be more flexible or stick to principle much more easily than career politicians.

Nevertheless, the US president faces some other problems. First, Chinese leaders have learned what his strategic and tactical goals and methods are long ago. Consequently, they will become less effective over time. At the same time, China differs from European countries, which are more and more often snubbed by Trump like dependent clients, rather than partners with an equal status. The economic scale plays a role, as does the overall trends and national pride. Suffice it to recall that in early 2016 China generated 14.8 percent of the global GDP, with the United States accounting for 24.3 percent, while the Russian share was only 1.8 percent. The following situation seems distinctly possible: China might reject America’s bluff, and the President would have to decide whether to introduce tariffs and launch a real trade war or lose face by making unilateral concessions. The moment of truth is fast approaching: the introduction of tariffs has been delayed until December 15. At the same time, many US retail chains, especially small private stores, get over 50 percent of their annual earnings during two holiday seasons: in the run-up to Thanksgiving Day in late November and Christmas in late December.

Suzerain-Vassals Relations: How Trump Shapes His European Policy
Andrei Korobkov
Last week, Donald Trump demonstrated the stark contrast between the way he talks with Vladimir Putin who, albeit an opponent, is still the head of a great power, and the way he talks with European leaders, seen as vassals. At a meeting with Jean-Claude Juncker on July 25, the US president called a spade a spade once again and sent Europe a clear message that the western alliance is not a union of equals anymore. No matter how the trade war ends for Europe, the rules of the game have changed, said Andrei Korobkov, Professor of political science at the Middle Tennessee State University, in an interview with valdaiclub.com.
Expert Opinions

Nor should one overlook the fact that the US elite have every reason to view Trump as a systemic threat. The political establishment, the elite media, the show business, academia, the essentially transnational financial capital and the hi-tech sector all oppose him. Trump is supported by the real economy sector, including industry and agriculture, small and medium-sized businesses and the white middle class. The elite now hates the president so much that they are ready to stage just about any provocations against him, including ones that could seriously damage the US economy. Therefore, it is possible that we may witness attempts to hamper agreements between the US administration and Chinese leaders, to provoke a crisis in bilateral relations (and not just them), including tariff wars, to destabilize markets and to bring about the start of a recession.

As elections approach, tension will increase in bilateral relations, and the elites will try to provoke a crisis more actively. Nevertheless, Trump perceives the reformatting of relations with China as a tactical and strategic objective. At the same time, he wants to prove that, unlike professional politicians, he always fulfills his campaign promises. Therefore it goes without saying that Trump will stubbornly press on with his China policy.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.