Trade truce is a win-win – but it’s probably a temporary calm before the next storm

“If you want peace, prepare for war,” advised Roman military strategist Vegetius.

And in many ways, one should understand US President Donald Trump’s trade war against China in similar terms. In Trump’s own words: “You can never show weakness. You’ve got to project strength.”

A rising China, however, is demanding nothing less than absolute equality, so strategic acquiescence seems out of the question.

Nonetheless, we should welcome the latest ceasefire, no matter how fragile or transient, following talks between Trump and Chinese President Xi Jinping on Saturday. This is a perfect opportunity to forestall an ineluctable march towards global catastrophe.

As expected, Trump settled for a temporary trade war truce with Xi during their meeting on the sidelines of the Group of 20 summit in Osaka. Trade negotiations are back on track and additional tariffs have been put on hold.

Most importantly, Trump signalled a partial relaxation of sanctions against Huawei Technologies, which has faced an almost existential threat in recent months. The Chinese telecoms giant will soon be allowed to start buying advanced technology from Silicon Valley again, including from software companies such as Google as well as hardware producers like Intel and Micron Technology.

Taking an optimistic tone, the American leader made it clear that the two countries “can help each other” and even become “strategic partners”.

Japanese Prime Minister Shinzo Abe, this year’s G20 host, reportedly facilitated the temporary rapprochement between the two superpowers.

The announcement of a temporary compromise was largely expected. Ahead of his re-election campaign next year, Trump is increasingly worried about tanking investor confidence at home as well as the negative impact of the trade war on ordinary consumers and small business.

Moreover, the impact of his tax cuts is beginning to taper, thus the anaemic stock market that has served as a major bellwether of Trump’s economic performance. Above all, there are already growing worries over a potential recession in the United States.

So, Trump had compelling reasons to freeze his escalating trade war with China, which is also grappling with slowing growth and a rapidly deteriorating current account balance. The outcome of the G20 summit, then, is a win-win not only for both sides, but the broader international community.

A fully fledged US-China trade war would not only spell disaster for the global economy, but also irrevocably undermine the precious peace dividends following the end of the cold war.

As Russian President Vladimir Putin warned ahead of this year’s G20 gathering, “it seems that [nowadays] there are no rules at all … the world has become more fragmented and less predictable”.

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The US and China, as the world’s two most powerful countries, are the anchors of global order, so relative stability in their relations is in the collective interest of all nations.

Leading economists have warned about the devastating consequences of a protracted trade war, especially given China’s growing centrality to global growth and development.

Another cause for alarm is the world economy’s diminishing immunity to economic shocks. Major economies have exhausted their fiscal and monetary tools following a decade-long battle with the immediate and longer-term impact of the 2008 Great Recession.

An additional shock could prove fatal for the fragile global economic recovery in recent years.

To make matters worse, the world is already grappling with a toxic combination of tempestuous energy markets amid rising tensions in the Persian Gulf, a disturbing debt build-up across flailing emerging economies, and increasingly jittery financial markets.

An escalating trade war is a lose-lose for all sides. Yet, if there is one lesson from modern geopolitics, it is that reason doesn’t always prevail, with domestic politics and personal biases of key leaders often playing a more decisive role.

There are compelling reasons to think that this is likely a temporary lull before the next storm.

First, Trump’s negotiating strategy is fundamentally based on the element of constant surprise and part-calibrated risk-taking. He is eerily similar to the Persian emperor Xerxes, who told his adviser, Artabanus, ahead of his invasion of Greece, “big things are won by big dangers”.

The American leader belongs to what the British philosopher Isaiah Berlin characterised as “hedgehog” personality types, who “relate everything to a single central vision”, in terms of which “all that they are and say has significance”.

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Trump’s ultimate goal is not permanent conflict with Beijing per se, but instead the reconfiguration of US-China economic relations on Washington’s terms. For Trump, it’s also a matter of fulfilling his promise to return manufacturing jobs to the rust belt, a key constituency.

Moreover, the American president’s aggressive instinct on trade issues will likely be reinforced by the iron triangle of China hawks – Commerce Secretary Wilbur Ross, trade policy adviser Peter Navarro and US Trade Representative Robert Lighthizer – seeking to block China’s rise in cutting-edge technologies and high-end industries.

Secretary of State Mike Pompeo and national security adviser John Bolton have also encouraged an increasingly more hostile position on China, which they view as an irredeemable strategic rival and ideological adversary. Above all, Trump’s tough policy on China is gaining bipartisan support at home and shaping American strategic thinking.

On the other hand, it’s also unlikely that the Chinese leadership will ever agree to America’s growing demand for it to overhaul its trade and industrial policy. Precisely because of this structural deadlock, the current trade truce should serve as a catalyst for innovative and comprehensive negotiations rather than misplaced complacency.

Richard Heydarian is a Manila-based academic and author of the upcoming book, “The Indo-Pacific: Trump, China and the New Global Struggle for Mastery”