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US-China relations
Opinion

Will Trump’s hard line on US trade with China mean the end of business as usual?

Robert Boxwell says the Trump administration, which appears ready to tackle head-on America’s multifaceted trade conflicts with China, should be clear about its plans

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Robert Boxwell says the Trump administration, which appears ready to tackle head-on America’s multifaceted trade conflicts with China, should be clear about its plans
Robert Boxwell
Trump’s announcement last week of America’s withdrawal from the Trans-Pacific Partnership indicates a hard line on trade generally, but he offered little else in the way of a Plan B. Illustration: Craig Stephens
Trump’s announcement last week of America’s withdrawal from the Trans-Pacific Partnership indicates a hard line on trade generally, but he offered little else in the way of a Plan B. Illustration: Craig Stephens
US President Donald Trump’s cabinet picks expressed divergent views on some issues during their Senate hearings, but they mostly seemed in agreement that US trade with China, as it stands, isn’t working. Americans who haven’t benefited from globalisation largely agree. Those who have benefited – from what cynics call a vast transfer of wealth from the US to China – don’t.
The US trade relationship with China has evolved since Richard Nixon and Henry Kissinger began crafting a strategy to normalise relations with Peking – as it was then known in the West – largely to counterbalance the Soviet threat of the day. Just weeks after Nixon’s inauguration, Kissinger wrote in a memo to him, “We have one more major play to make in this string – the offer to resume non-strategic trade with the mainland.” The “string” was negotiations to normalise relations without, as they later called it, “[selling] Taiwan down the river”. The two thought of trade as little more than a useful bargaining chip.

China will be the clear winner if Trump declares a trade war

Today’s trade conflict stems from a combination of factors that includes the willingness of successive US governments to accept long-dated promises of reform – not kept by Beijing – in return for Chinese access to American markets, and a cynical, short-term view by American business about handing over technology and know-how in return for access to China’s markets. Because, while American CEOs drooled over the thought of selling to China’s billion customers, the country’s per capita income was US$194 in 1980. Now that tens of millions are reasonably middle class, Americans see Chinese companies, American technology and know-how in hand, pushing them out, often with the help of Beijing.

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Two women choose toys at a shopping centre in Shanghai. American CEOs drooled over the thought of selling to China’s billion customers. The reality is that, since 2001, Americans have spent almost US$4 trillion more buying China’s exports than Chinese have spent on America’s. Photo: Xinhua
Two women choose toys at a shopping centre in Shanghai. American CEOs drooled over the thought of selling to China’s billion customers. The reality is that, since 2001, Americans have spent almost US$4 trillion more buying China’s exports than Chinese have spent on America’s. Photo: Xinhua

US consumers, on the other hand, to whom Chinese businesses had access as soon as they became competitive, were rich, or spent like they were, with banks handing out credit freely. Since 2001, Americans have spent almost US$4 trillion more buying China’s exports than Chinese have spent on America’s.

Beijing, nursing a two-century grudge, was never going to fall in behind American leadership or Western institutions. This was always clear

The unstated goal of starting to trade with China in the 1980s was consistent with an American post-war philosophy evident throughout the developing world: help countries develop and prosperity would lead to peace, freedom and democracy, all of which would counter the threat of communism. But Beijing, nursing a two-century grudge caused by what the nightly news still reminds Chinese was the humiliation inflicted on it by Western imperialist barbarians, was never going to fall in behind American leadership or Western institutions. This was always clear.

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