US President Donald Trump’s trade war against China (and the world) might not be his decision alone. Previous administrations, the US Congress and neoconservatives have made preventing any nation from challenging US supremacy their business. In this regard, this author was wrong in predicting that Trump would not follow through with the trade war threat because it would cause unthinkable damage to the economies of the US, China and the world.
However, concern over China’s rise, particularly on the technological front, has unnerved not only the US president but members of Congress, the neoconservatives and the majority of the public. China’s industrial blueprint, “Made in China 2025,” is fast narrowing the technological gap and indeed the Asian giant might surpass America in some areas: fast computing, high-speed railway, artificial intelligence and driverless cars.
China might be nearing “peer level” in military technology. Though still behind the US in terms of firepower, China has the weapons systems needed to kill Americans and destroy property on a large scale. Contrary to US Republican Lindsay Graham’s claim that the war will be fought “over there” in a June 8 Fox News Face the Nation interview, a US-China military conflict will be fought on American as well as Chinese soil.
On the financial front, the Chinese currency is becoming increasingly internationalized. It was included in the IMF Special Drawing Rights (SDR) basket, effectively making the yuan a world reserve currency. China has also established the “petro-yuan,” allowing other countries to trade oil in yuan, undermining the power and influence of the greenback.
For these reasons, the “Chinese threat” rhetoric has turned into a reality, prompting Trump to label China as the country’s long-term “imminent threat.” That is why the US is not only mounting a trade war against China but playing the Taiwan card and challenging the Asian power in the South China Sea.
Trump is not alone in itching for a war, either a trade or a military one, against China, which explains why he followed through with his trade war threat against the country. Democrat Senate Minority Leader Chuck Schumer. Republican Senators Lindsay Graham, Marco Rubio and others might be even more hawkish than Trump regarding China, judging from these lawmakers’ relentless China-bashing rants printed in the media.
Trump’s support base, farmers and laid-off factory workers and miners in the “rust belt” states elected him in part for his anti-China rhetoric, despite the fact that the trade war might hurt them more than other Americans. Rightly or wrongly, Trump supporters genuinely believe that China is responsible for their economic and financial woes.
Indeed, given his personal relationship with Chinese President Xi Jinping and concessions (i.e. allowing ZTE to operate), Trump might not have followed through with his trade war threat without Congressional and popular support.
However, blaming a trade war with China would not solve America’s problems. In any case, the approach in “dealing” with China is on the “wrong side of history”.
History is not on Trump’s side
History shows that trade protectionism, political populism and misinformation largely caused the Great Depression, Vietnam and the Iraq wars for which America paid very dearly.
Instead of protecting American manufacturing and jobs, the 1930 Smoot-Hawley Act, in fact, destroyed them, leading to the Depression on both sides of the Atlantic. This was because other countries retaliated with their own protectionist policies, shutting out external markets. With insufficient aggregate demand at home, US unemployment rose dramatically, culminating in “breadlines.”
Falsely accusing North Vietnam of firing on a US warship in the Gulf of Tonkin generated support for the Vietnam War, which resulted in America losing over 50,000 young men and women, according to an April 28, 2015, HuffPost report written by John Tirman. The Iraq War, which was based on the unsubstantiated claim that Saddam Hussein possessed weapons of mass destruction, killed up to a million Iraqis and over 5,000 Americans, and turned the country into a dysfunctional state wrought with sectarian conflicts. According to a March 14, 2013, Reuters report, “The Iraq war costs US more than $2 trillion: study,” written by Daniel Trotta, the conflict could cost over $6 trillion over the next four decades, counting interest incurred from the trillions spent.
Blaming China for America’s manufacturing and job losses are equally faulty. Trump’s alma mater, the University of Pennsylvania, for example, attributed the losses to automation and businesses’ decision to discard manufacturing in favor of services as America’s growth engine. Thus, Trump’s trade adviser, Peter Navarro, accusing China of “hollowing out” manufacturing and stealing 25 million jobs is grossly misleading.
Further, accusing China and other countries of “eating America’s lunch” does incur economic, geopolitical and political costs. Some of its businesses will close, consumers will pay higher prices and unemployment will rise. Trump may not be able to secure China’s or other countries’ help in addressing global issues such as the denuclearization of the Korean Peninsula.
Manufacturing may not return to the US, at least not to the extent he promised, because of higher wages and more stringent environmental and labor laws, which means Trump’s supporters could turn against him, denying him a second term.
Furthermore, Trump’s tariffs already caused some US manufacturing companies to relocate abroad. In a June 25, 2018, Vox report, “Harley-Davidson is loser in Trump’s trade war,” written by Emily Stewart, the company is relocating production abroad.
Past “containment” policies
Past “containment” policies toward China had the opposite effect. “Freedom of navigation operations” in the South China Sea prompted China to build islands and install weapons systems on them, making it increasingly difficult, if not more dangerous, for the US and its allies to sail their warships through the waterway. Blocking China from accessing US technology has enhanced its technological prowess. Trying to dampen China’s exports resulted in its establishment of the the Belt and Road Initiative and hurt America’s economy.
In that light, there is no reason to believe that a trade war against China (and other countries) would “Make America Great Again.” Destroying China’s economy would harm that of the world because it has contributed over 30% of global economic growth since 2009, according to the World Bank and other reputable organizations.
Moreover, the American and Chinese economies are increasingly intertwined, each needing the other to grow and prosper. For example, US chip makers need Chinese technology firms to survive and the latter (i.e. ZTE) to stay in business.
Too late to contain China
In any event, it is too late to contain China; forty years of economic reform has transformed the country from an impoverished backwater into the world’s largest economy in purchasing power parity terms and second biggest in nominal exchange measurements. The quick accumulation of massive wealth and power allow it to push back the “American threat” or economic/military adventurism.
Indeed, China is even more determined to forge ahead with its Belt & Road Initiative (BRI) and “Made in China 2025” industrial policy. Its leaders, from Foreign Minister Wang Yi to Premier Li Keqiang, have been traveling the world to promote the BRI. According to China’s State Council, the country’s cabinet, the government will spend over $1.5 billion on the industrial policy, directly challenging US technological dominance.
In short, containing China requires a military option, a prospect the US appears willing to risk to “keep China in its place.”