America’s trade war with China is widely seen as a personal project of Donald Trump. It’s obvious why. It has all the hallmarks of the president’s style – aggressive and unplanned, disparaged by the global establishment and likely to cost the very voters who support him. It’s another instance of Trump’s assault on the system of international trade.
Thus, the underlying assumption for many is that Trump will back off from the confrontation, whether because he gets distracted by other issues, decides the political cost is too steep, or decides, as he did with the North American Free Trade Agreement, to settle for symbolic concessions and claim victory.
Those assumptions are wrong. The world should be readying for a new era, in which the two biggest players in the global economy are in a state of perpetual conflict, an economic cold war that could easily slip into something more dangerous.
Unlike most other of the president’s policies (including his presumed love of Israel or loathing of the North Korean leader) Trump has long spoken out against China, and has been consistently hostile.
“It’s an economic enemy, because they have taken advantage of us like nobody in history,” he said about China during a 2015 Good Morning America interview. “It’s the greatest theft in the history of the world what they’ve done to the United States.”
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The White House’s policy goals may be characterized by internecine warfare among top officials, and experts remain baffled by what the United States actually wants from China.
But one thing for sure is that the Trump administration has no plans to return to the era of cooperation with Beijing in the hopes of gently coaxing it into becoming a member of the international system in good standing.
A speech given by Vice President Mike Pence almost two weeks ago illustrates the new attitude toward China. It’s not just about Beijing’s trade practices and America’s whopping $335 billion trade surplus with the U.S. last year. It was a broad attack on everything China is and does, from imposing an “Orwellian” system of social controls to buying allies with cheap loans and engaging of reckless militarism.
As many commentators suggested, it sounded like a call to Cold War, not a to-do list of grievances to be settled through trade talks.
The 'China way'
The last Cold War, which lasted for more than four decades, ended with a hands-down victory for the U.S. The war itself was fought in terms of arms races and third-world proxy wars, but America prevailed because of its better-performing economy and technological edge.
In the emerging Cold War with China, each side’s assets are considerably different than they were in the late 1940s, when the U.S. and the Soviet Union began their face-off.
Militarily, China is nowhere near where Russia was at the start.
Ideologically, Russia’s Communism had a compelling model for society to oppose America’s democratic capitalism, but China does not. It can point to its huge economic achievements led by an undemocratic government, but the model isn’t the kind of thing that is going to inspire masses of people to choose the “China way.”
In the end, however, economics will be the decisive factor, and here, too, America is in a stronger position. The U.S. economy remains much larger than China’s (24% of world output last year versus 14.8%) and much richer (GDP per capital of $59,000 versus $16,700).
As Washington’s sanctions campaign against Iran demonstrates, America’s size and its web of trade, finance and investment connections, not to mention the paramount role of the dollar, give it global influence Beijing can’t come close to matching.
Finally, America has a technology lead that China will take years to close, despite its best efforts, if it ever does. The ZTE affair earlier this year – when a leading Chinese tech company came close to collapse after the U.S. imposed sanctions on it for trading with Iran and North Korea – showed the extent to which even China’s technology champions rely on American components and intellectual property.
The U.S. economy, of course, relies on China as a critical component of its supply chain for everything from iPhones to rare earths, but Beijing isn’t free to disrupt the chain. Its leaders have to deliver consistent, strong economic growth to maintain the appeal of the political system, both to the Chinese themselves and prospective allies.
Unlike Cold War Communism and American liberalism, China has no ideals or political principles to fall back on. If it can’t ensure economic growth, then who needs it?
Xi himself may understand that and that is why he has been trying to revive Mao-style communism, but he faces an uphill battle.
One of the positive outcomes of a prolonged cold conflict with China is that America will need allies, just as it did in the conflict with Russia. As much as Trump disparages the international system, so far, his attack has been more about words than actions. NATO is still intact, and NAFTA is back in business under a new name. The Trump White House is even beginning to realize that allies, international institutions and even foreign aid aren’t such a bad thing after all.
In that context, Israel may well find itself having to make some difficult choices. Tech-hungry China wants Israeli innovation, and we have been happy to provide it, but America will almost certainly begin looking askance at its ally giving Beijing any kind of boost, especially of the technology has military applications. Israel may have to sacrifice its new pal China to keep its old friend America.