China vs America is the Cold War of our times
Donald Trump has grounds for complaint, but he is misguided in his bid to tame the dragon
Sometimes the best explanations are the most obvious ones. In answering why Donald Trump has chosen this particular moment to escalate his trade war with China, we must look first to November’s midterm elections, where on the basis of current polling, the Republicans can expect to take a beating. Never mind the art of the deal: the US president also knows a thing or two about how to press populist buttons, and getting tough on China plays well with the voters. He strikes a chord when he says that the root cause of US deindustrialisation these past several decades is a cheating and stealing China that for too long has been allowed to take Americans for fools.
But beyond electioneering, there is a puzzle. What is Mr Trump really trying to achieve with his crack down on Chinese imports – actions that, never mind the intended victim, are likely to inflict considerable damage on the US economy itself ?
Much of the US complaint against China is legitimate. China has stolen Western technology on an industrial scale, and it has been clever and ruthless at exploiting the international rules-based trading system to its own advantage. In trade disputes, it has, as the new kid on the block, behaved like a spoilt child; it has expected favours, and largely got its way.
The benefits to China of economic engagement with the rest of the world are manifest. But to the West they are far from obvious. Its “belt and road” initiative, moreover, is quite widely regarded not as the altruistic development programme it pretends to be, but as a deliberate geopolitical land grab, aimed at undermining Western hegemony. China is used to getting its own way, hypocritically trumpeting the supposed global benefits of free trade, while in truth practicing protectionism in its own backyard. Trump has upset this one-sided status quo, and sown confusion and not a little fear in China’s usually self-assured leadership.
If by getting tough, Mr Trump’s only intention is to improve the terms of trade – or to win “free, fair and reciprocal trade”, as he puts it – then perhaps we shouldn’t be overly concerned. Some outriders in Chinese officialdom even believe that were they to cave in to all the US demands, far from weakening China’s economy, it might actually strengthen it.
Even so, the risks of matters spiralling out of control and causing serious conflict are real enough. Jack Ma, outgoing chairman of Alibaba, China’s version of Amazon, believes the current standoff will last decades, and in anger has threatened to renege on his promise to create a million US jobs. Proud and still surprisingly insecure despite its achievements, the Chinese hierarchy is determined not to give ground, or lose face.
A narrative around Mr Trump’s confrontational boots-first approach has grown up, which has it that this is the way successful business deals are done – by cajoling and threatening until the other side unconditionally surrenders. As a buccaneering dealmaker, Mr Trump ought to know. But that’s rarely how business works in practice. Compromise, often hammered out over a convivial dinner, allowing both sides to claim some kind of win – and indeed, to believe they have achieved one – is the usual way of things in commerce.
To begin a negotiation with a strike-first approach is only to invite two fingers. Mr Trump’s bellicose language and actions have understandably given rise to the suspicion – some would say near certainty – that the real motive is not fairer trade at all, but Chinese containment from a hegemon that feels its position threatened, geopolitically, technologically and economically.
Despite denials from more conciliatory voices in the US Treasury and trade department, there is plenty of evidence from leading figures in the Trump administration to suggest that this is indeed the underlying purpose. And if that’s the case, then it is much more serious. Today’s trade war will soon transmogrify into a new cold war.
Already, America’s traditional allies are being invited to take sides, to the dismay of the UK Government, which sees enhanced trade with China as a potential economic lifesaver after Brexit. UK policy is to embrace China and exploit its stellar levels of development, not ostracise it.
Whatever the plan, Trump’s actions have thrown a massive great boulder into the pond, seriously upsetting Chinese plans to chase the US into economic and military supremacy. Jack Ma is right: the repercussions will last decades, but quite unnecessarily so. For there is a sense in which Trump is fighting the last war. Sheer weight of numbers makes China’s continued long-term ascendancy inevitable, while an ever more self-sufficient economy that will be further enhanced by China’s rapid adoption of tomorrow’s technologies makes it increasingly difficult to inflict meaningful damage on its progress. The train has left the station and cannot now be stopped. The US president finds himself on the wrong side of history in thinking confrontation a viable substitute for mutually beneficial coexistence.
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