The US is preparing for a trade war with China – don’t be fooled by the noise
Scott Kennedy says America’s new tools to exert regulatory pressure on China weren’t ready when Donald Trump touched down in Beijing, so he brought out the gongs to distract the world audience. But all-powerful Xi Jinping may have other ideas
There was widespread relief among Chinese businesspeople and officials I met this past week. They almost uniformly believe that the commercial agreements and personal camaraderie mean the relationship has been stabilised: thanks to the emergence of Trump’s true self as a deal maker, the education he has received from the American political and business establishment, and China’s own beneficent patience.
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Nothing could be further from the truth. My sense is that we are on the cusp of a new American strategy in which Washington replaces dialogue and multilateralism with extended unilateral pressure.
Since then, the Trump administration has been moving systematically to put the regulatory pieces in place so that it can credibly threaten China with limits on its exports, investment and other elements of the relationship.
These tools were simply not ready by the time Trump descended from Air Force One in Beijing, and so out came the gongs to distract the world audience. And Trump would certainly feel within his rights to pocket these deals without giving China any reassurances, since that is the administration’s view of how China plays ball.
When a Chinese official announced that China had loosened investment restrictions in its financial sector, which the US had been seeking for over a decade, Trump had already jetted off and did not even send a stand-in from the embassy or a thank-you note.
Any recognition of progress would have undercut the rationale for the fight he wants to launch.
There is a new Washington consensus: China plays unfair, and its unbridled industrial policy is dangerous for China’s trading partners, global supply chains and business models built on fair competition.
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Although the Obama administration’s rules-based approach did not tame China Inc, a high-handed, unilateralist approach could be even more damaging to American interests and the global economy.
Just as importantly, America is preparing for battle with China at just the moment when the differences in political standing of their two leaders could not be more stark.
The US president continually finds himself under attack, and the chances of bipartisan consensus on any national challenge seem less likely by the day.
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The sounds from the gongs of Beijing have faded, but if Washington does not pursue its case against Chinese trade practices with greater dexterity and care, the administration may soon hear ringing more akin to the American TV programme, The Gong Show, where judges dishonourably dismiss poor performers with the banging of a giant gong.
Such ignominy would be far more damaging than the noises emanating from any theatrical performance, American or Chinese.
Scott Kennedy is deputy director of the Freeman Chair in China Studies and director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies and editor of Global Governance and China: The Dragon’s Learning Curve