Confrontational trade policies come with many risks

The world watched with anticipation as US President Donald Trump and his Chinese counterpart Xi Jinping met at the G20 summit on Sunday. In what has been an incredibly tense few weeks, investors were bracing for the worst as Trump showed a dogged willingness to force concessions out of China. But, over dinner, the two sides agreed to a temporary truce, with the US delaying for 90 days the imposition of 25 percent tariffs on Chinese imports; the latest episode in a worrying saga of growing protectionism posing a threat to global peace and stability.

The G20, founded to promote international financial stability, now finds itself divided as rising nationalist sentiments raise questions about its ability to deal with trade tensions.

Since becoming president, Trump has turned Washington’s trade policy on its head, imposing tariffs on key allies and hurtling the US into a commercial confrontation with China. Given that the US economic model has been an example that other global economies have sought to follow, especially its commitment to free trade and globalization, the American retreat from such principles is putting a great strain on critical relationships.

Simultaneous acute geopolitical tensions and growing protectionism have the potential to seriously exacerbate global insecurity. Rather than use the summit to resolve tensions, Trump canceled a meeting with Vladimir Putin, who was keen to end crippling anti-Russian sanctions and talk with his US counterpart about his intention to opt out of the 1987 Intermediate-Range Nuclear Forces Treaty.

By pursuing a policy of supporting tariff hikes, the US will be less likely to draw the international concessions it wants from Moscow, which instead used the summit to curry favor with other members. Citing US intransigence on trade with China, Putin issued a thinly veiled attack on the policy as “dishonest competition.”

How the world’s two largest economies trade has massive consequences for the entire global economic system. The Sino-American relationship will always be complicated — not only are the two countries in competition, but their economies are greatly intertwined, with China holding considerable American debt and America importing vast amounts of Chinese goods and products. However, the US president has chosen to pursue economic policies to pander to his voter base, whilst the economic fundamentals of the relationship show clearly that, despite military and political friction over certain issues, neither country can afford the decline of the other.

Confrontational policies come with great risk, as the two economies are reliant upon each other to succeed and the bonds between them are in fact only growing. Eight times more Chinese students are enrolling at Ivy League universities than a decade ago, for example. Trump would do well to bear this in mind, especially since US global leadership is based on America’s commitment to certain principles, which it cannot be seen to undermine.

As the G20 came to an end with another non-binding agreement, the organization’s ability to secure free trade is in jeopardy. The final communique failed to mention the word “protectionism” owing to resistance from the US — yet another example of how global norms cannot be implemented and are under threat without generous support from Washington.