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A new round in the U.S.-China trade dispute has started in earnest. Last Sunday (May 5) President Donald Trump tweeted that he would raise the current 10 percent tariff on $200 billion worth of Chinese imports to 25 percent. The President doubled down on his trade war threats with China early today (May 10), just hours after last Sunday’s decision went into effect. In addition he warned that he’d continue raising tariffs on Chinese imports if there was no agreement: the Chinese “should not renegotiate deals with the U.S. at the last minute.”
Only last week, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin sounded optimistic about the latest round of bilateral negotiations, with Mnuchin telling Fox Business that the deal was “close to done.” The Chinese then suddenly revised some of the key provisions of the 150-page draft agreement. Specifically they tried to soften the language on the theft of intellectual property, financial services, forced technology transfers, and currency manipulation. Lighthizer and Mnuchin were taken aback at the extent of the changes in the draft and on Monday told reporters that Chinese backtracking had prompted Trump’s tariff order.
The current talks in Washington between China’s trade delegation and U.S. officials nevertheless will continue. Trump’s team has a strong hand, while the Chinese may have overplayed theirs. The U.S. economy grew by an annualized 3.2 percent in the first quarter of 2019, easily beating market expectations and following a 2.2 percent expansion in the previous three-month period. By contrast, on a quarter-on-quarter basis, the Chinese economy grew 1.4 percent in the first quarter, compared to a 1.5 percent expansion in the previous period. It was the weakest quarterly growth rate since the first quarter of 2016. New U.S. tariffs could further slow China’s growth rate and jeopardize President Xi Jinping ambitious “Made in China 2025” program of economic, technical and scientific development. Right now China needs an agreement far more badly than the U.S.
My hunch is that the Chinese will compromise. Their team is led by Vice Premier Liu He, a Harvard alumnus who enjoys Xi confidence. He is well aware of the potential cost, both economic and political, of a 25% across-the-board U.S. tariff. Liu also knows that a bipartisan agreement has matured in Washington that the U.S. needs to adopt a stricter approach to China’s violations of WTO rules, and in particular its indirect subsidies of state enterprises and currency manipulation. As a means of preventing broader and permanent tariffs, Liu is likely to reinstate that agreement and accept the Administration’s demand that China stop forcing U.S. companies to form joint ventures with Chinese firms when they do business in China. That practice has often led the Chinese partner getting hold of U.S. trade secrets and then abruptly ending the partnership.
The broader question is whether the U.S. and China can manage their overall relations, in the years and decades to come, without a war. This cardinal question was the theme of Graham Allison’s important 2017 book Destined for War: Can America and China Escape Thucydides’s Trap? Allison is director of Harvard University’s Belfer Center for Science and International Affairs and a founding dean of the Kennedy School of Government. He is also a key practitioner of “applied history,” a very useful technique which I often use in my geopolitics and international relations classes. It enables us to illuminate current challenges and policy choices by scrutinizing historical precedents and analogies.
Allison’s key thesis is that major wars often result from the confrontation between a status-quo power and a rising challenger. His historical review starts with the Pelopponesian War and Thusydides’s well-known diagnosis of its cause: “What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta.” Allison’s 16 case studies include four instances of power shifts when war was avoided, notably when Great Britain reluctantly adjusted to the rise of the United States in the 1890’s; and three times more numerous instances of challenges which resulted in wars, notably between Britain and France in the 17th and 18th centuries, and between Germany and her adversaries twice in the 20th.
As for our own time, the phenomenal rise of China’s might is comparable to the U.S. eclipsing Britain between 1870 and 1914. Allison aptly asks whether in the years ahead it will be more difficult for the Chinese to rationalize a cosmology in which they are not the only rightful and inherently superior center of the civilized world, or for the U.S. to accept that it must live with another, and possibly superior superpower.
In order to avoid the contemporary Thucydides trap, Allison says, U.S. decisionmakers should grasp that China’s assessments of threats and opportunities are very different from America’s own. In the capital of the United States of Amnesia, he warns, everything is declared to be “unprecedented,” but nothing is inevitable. He defines four major strategic options:
Above all, Allison concludes, it is high time for U.S.policymakers to clarify America’s vital interests: “is maintaining US primacy in the western Pacific truly a vital national interest?” Would America risk war to prevent China’s seizure of Taiwan? As we have repeatedly stated in this column, “[g]eopolitical projects—or even responses to crises—decoupled from national priorities are bound to fail.” Full-spectrum dominance eventually leads to imperial overstretch.
It is evident that China intends to exclude the U.S. from the Asian mainland in order to restore what it sees as its rightful sphere of influence and “harmonious co-existence.” It is also evident, over many centuries of human experience, that it is futile for any status quo power to try and prevent geopolitical adjustments that would reflect the realities of a new distribution of power in real space. The Chinese leaders are reconciled to a major confrontation with the U.S. in the fullness of time, but they are not ready for it now. In spite of its current slowdown China has been phenomenally successful in terms of global trade flows and financial solidity, and she is harnessing her resources for the great showdown some time later this century. Beijing thinks it is too early in the day to up the ante, and therefore Xi will let Trump score a victory over trade right now. When it comes to America’s global position, however, in the long term China is far more perilous to the maintenance of pax Americana than Russia has ever been.
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