China-US relations

The US sees the trade war as a tactic to contain China. So does Beijing

Deng Yuwen says the trade conflict is only a proxy for the larger battle for dominance between the two powers. With all signs pointing to a Chinese government determined to fight back, given that its goal of national rejuvenation is at stake, China is unlikely to cave in to US pressure

PUBLISHED : Wednesday, 04 July, 2018, 2:01am
UPDATED : Wednesday, 04 July, 2018, 7:07am

China and the US are heading into an epic trade war. Does this signal the beginning of an era of all-out confrontation between the two powers, or will the fight be limited to the economy? There are different views on this.

For the US, this trade war must be seen in the larger context of a shift in America’s perception of China. Many experts, scholars and even regular folk recognise that the Trump administration’s targeting of Chinese trade is not being done on a whim; it is supported by the two political parties, Congress and the US public, including the business sector.

In other words, the whole of American society appears to have reached a consensus on a new approach to dealing with China. For the first time in 40 years, the US now sees China as a rival nation to be contained and beaten. This view is reflected in the US security strategy unveiled late last year, in which China was named as a major competitor seeking to challenge US power and undermine its interests.

To use the language of the hawks in US policy circles, China is now the enemy. So, it’s not surprising at all that President Donald Trump has taken such an uncompromising stance on trade against China. While divergent views within the administration may emerge on occasion, the general trend is clear: the China hawks are on the ascent.

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By contrast, within China, views on the trade war are much more diverse. Although more people favour taking the fight to America than oppose it, their motivations are widely different.

Within the government, while officials from the commerce and foreign affairs ministries have repeatedly promised to respond to America’s trade sanctions with a “fight to the end”, the top leaders have not been as clear about their views in public. This includes Vice-Premier Liu He, China’s point man at the trade talks, who has made no public comment apart from the official statements.

Such reticence is typical of the Chinese leadership style. In public, top leaders rarely speak their minds on contentious or sensitive issues. If they do make a public statement, it means the government is poised to take action. Leaders in the West are much more direct. This is especially true of Trump’s presidency: there has been a steady stream of media releases by Trump and his team, and in fact we often find out the latest in US trade policy from Trump’s tweets.

This is not to say Chinese leaders are not preoccupied with the looming trade war. The question is, how do they see it? Do they regard the sanctions and other threats as a US tactic to force trade concessions out of China, or only the first step in a concerted effort to curtail Chinese development? The answer will rest on Chinese leaders’ judgment of the nature of China-US relations.

What can we deduce from the Chinese government’s actions so far? After Trump slapped punitive tariffs on US$50 billion of Chinese goods on June 15, Beijing hit back immediately by announcing its own tariffs of the “same scale and same intensity”. Since then, every time the US has escalated the fight, China has continued to talk tough to portray its willingness to pay back in equal measure whatever harm the US could inflict.

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Although some government-affiliated scholars believe China’s only option is to strike back, I believe the Chinese stance reflects a change, too, in how it views its relations with the US.

Of course, China’s tough talk could stem from nationalist pride – a way to push back on American pressure in words while holding back on its actions to leave some leeway for further discussion and compromise. After all, trade between the two countries is not symmetrical and there is a limit to how much pain Beijing can inflict through imposing tariffs on US imports.

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Or, perhaps Beijing believes that by threatening retaliation, it could force the Trump administration to back off, or that China has the capacity to withstand the substantial damage to the Chinese economy in a full-blown trade war? If neither is true, then China’s response can only be explained by a change in its attitude towards the bilateral relationship.

On June 21 in Beijing, President Xi Jinping met a group of chief executives of mostly American and European multinationals. According to The Wall Street Journal, he told them that China would strike back at US trade tariffs. “In the West, you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” Xi reportedly said. “In our culture, we push back.”

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Also in the report, a Chinese official promised that Beijing would be unyielding in its approach to Washington. “China is not going to yield to outside pressure to eat the bitter fruit,” the official said. “That’s the negotiation principle set by President Xi.”

In the past, such meetings were hosted by the premier, but this year Xi attended instead – a sign of China’s determination to get its message across: it is ready for the trade war.

In fact, a research firm reportedly said in a recent note to clients that Xi presided over a high-level government meeting and called on all officials to be prepared for a full-scale trade war.

Xi’s words at both meetings signal that China and its leaders have already come to a conclusion about America’s trade war: they see it as the first step of a US plan to curb the rejuvenation of the Chinese nation. Given the importance of the goal of revitalisation, China will not tolerate any attempt to derail it.

From this perspective, China no doubt sees America as the biggest external threat to a Chinese renaissance, and feels that it is being pushed to act. It realises that no compromise is possible, as a small compromise would not satisfy US demands, while a big compromise would not be acceptable to the Chinese public. Even if it were possible to take a step back, Beijing would surely be wary that it would only encourage the US to press its advantage.

Thus, for China, the trade war is one that would decide the fate of the country.

When both sides clearly see the other as the biggest threat, a trade war looks certain to break out. Expect turbulence ahead as the global order gets shaken up.

Deng Yuwen is a researcher at the Charhar Institute think tank. This article is translated from Chinese