US-China trade war: Trump and Xi are locked in world’s largest game of chicken, and neither can blink
- A year into the trade conflict, with multiple rounds of talks failing, Washington and Beijing show no sign of easing retaliatory measures
- Neither side can afford a trade war – and neither side can afford to back down
Under such a scenario, all foreign companies will have to take sides with either Washington or Beijing – follow US orders to halt supplies to Chinese firms at the risk of being blacklisted by Beijing. The question now is: which companies will be next on both countries’ enemies list?
As the world’s two largest economies and powers, neither the US nor China has a shortage of such economic weapons in their arsenals. However, both also have their own vulnerabilities in the integrated global economy.
For instance, Washington and Beijing could withhold licences for companies operating in their countries; start regulatory investigations; slow down customs clearances; or use health and safety rules to stifle a company’s operations. They could expand their conflict to other areas, such as reducing or halting exchanges in academics, culture, the arts and military – all of which have been hinted at in recent moves to tighten or delay visa applications for such exchanges.
One thing is certain, however, is that this tit-for-tat will only lead to more escalation and confrontation. And the danger is that the trade war will not only continue to hit tariffs, but also spread to currency, technology, strategic materials and anything and everything.
Trump cannot afford to be seen as being soft on Beijing, with the general mood in the US towards China being more negative today than ever – and this sentiment is only intensifying in the lead-up to the next elections.
These factors may help to explain why the months-long negotiations collapsed at their 11th attempt last month, during which both sides were said to have agreed to 95 per cent of the deals.
Politically and tactically speaking, both leaders need to display a tough stance before making any substantive concessions to end the conflict.
As in all previous economic conflicts, China has more often been on the defensive, rather than the offensive. This is because the prosperity of China – which still lags in terms of productivity, technology, sophistication and management – relies more on pursuing further economic integration with the US, not decoupling from it. America’s per capita income and individual productivity are six and eight times higher than China’s respectively.
Cary Huang is a veteran China affairs columnist, having written on the topic since the early 1990s