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The China Zun tower and other buildings are seen through a window in Beijing’s central business district. The prospects for a resolution at the end of the 100-day truce between China and the US are dim, and the trade war is likely to widen and become a protracted battle. Photo: Reuters
Opinion
S. George Marano
S. George Marano

All-out trade war between China and the US leaves no room for optimism

  • S. George Marano says disputes over trade practices are only part of the larger power struggle between the two. Despite recent conciliatory remarks, the conflict is unlikely to wind down any time soon. Expect it to drag on, if not escalate
Much is being discussed with regard to the US and China seeking a resolution to the ongoing trade war. With representatives meeting, commentators seem optimistic about a solution. Though the optics look encouraging, any agreements should be viewed as short-lived. A resumption of harsher measures, especially from the US, is the most likely scenario.
First, this trade war should be viewed as a tactic in the overall China containment strategy; the ultimate aim of the US is to halt China’s rise. Yet America has never had an economic peer competitor. Its previous conflict with the USSR was fought on ideological grounds.

What’s more, winning or losing the trade war has different requirements for each party. From a US perspective, to win, it needs full Chinese capitulation. From a Chinese perspective, winning means the ability to remain standing. It is hard to see the latter submitting.

On the whole, the US is in the unenviable position of being damned if it does and damned if it doesn't, with respect to the rise of China. Fundamentally, the US believes China is stealing from it.

The rhetoric around forced technology transfers is one of the major sticking points, according to the Trump administration. It should be noted that the World Trade Organisation encourages developed economies to transfer technology to developing economies, of which China is one.
Conversely, the Chinese believe it is time for their return as a major global power, previously enjoyed before Western intervention. The US’ actions are seen in China as an attempt to suppress this rise. The memories of the “century of shame” are still vivid for many Chinese. More rhetoric from the US will further stoke such sentiment.
The current round of talks, in which US negotiators visited China, have sent some commentators into a spin with suggestions that the trade war might end soon.

Observers should be careful that their optimism doesn’t turn into a denial of the obvious. With the impending March 1 deadline, meaningful approaches to resolving the trade war are still lacking, with token gestures being presented. Any agreements in the interim can be viewed as mere window dressing.

With the instigation and continuation of the dispute by US President Donald Trump and his administration, and the likelihood of Trump extending his presidency to a second term unless impeached, it appears likely that the trade war will continue into the unforeseen future.

Furthermore, with the US economy beginning to suffer, as is to be expected, such a downturn will be presented as China’s fault. This will provide further ammunition for the Trump administration’s bellicose stance towards China.

Moreover, the extraterritorial reach of US law, the threat of economic sanctions, and exporting the trade war to US allies can be interpreted as the next phase. The Huawei case, involving its isolation by US allies and the arrest by Canadian authorities of its chief financial officer on behalf of the US, has set the direction.

These US allies are also major trading partners with China and thus they are at risk from China inflicting severe economic pain in response, which it has done before. These nations are being forced to choose the politics of the US over the economics of China.

Given all these factors, we should expect a continuation, and even an escalation, of the US-China trade war. The only thing that will reverse the US’ current direction is a harsh realisation that it is fighting a losing battle. Nonetheless, with the current pervasive anti-China sentiment, Washington is likely to keep applying pressure.

Overall, any discussion of an agreement to minimise the trade war will only be short-term. We should expect a long and protracted battle as the US doubles down on its approach to China.

While all parties will suffer immensely, it is the US that faces the greatest risks. The implications include a permanent shift in the global order, along with the possibility of global instability for decades.

S. George Marano holds a PhD from the School of Management at RMIT University, Australia, and has an MBA and Master of Commerce from RMIT University

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