China's US dollar reserves could be used as a weapon in the trade war with America. Photo: iStock
China's US dollar reserves could be used as a weapon in the trade war with America. Photo: iStock

“Trade wars are good, and easy to win,” US President Donald Trump proclaimed in March. Since then trade tensions between the United States and China have continued to rise, and it is obvious that what qualifies as a “win” in the president’s book might entail profound risk in longer-term implications in the security realm.

Some pundits are therefore understandably focused on the potential for a full-blown spat that could jeopardize global security in general and the US national interest in particular. A China less constrained by and invested in economic ties with the United States could pose a substantially greater challenge to US foreign policy. For all the Trump administration’s frustrations with managing interdependence, the consequences of decoupling could mean even bigger headaches.

The apparent reason for the trade war is the size of the US trade deficit with China, but the tensions between these two countries are rooted less in deficit figures than in high-tech and geopolitical competition. The United States sees China’s technological progress and growing proactive role in global governance as a cumulative national-interest challenge. Consequently, the tariff tussle that we see today is linked to Beijing’s ambitious flagship strategies Made in China 2025 and the Belt and Road Initiative (BRI), which have the potential to transform the global economic and geopolitical landscape. Therefore, the US-China tariff tussle must be perceived in the context of the game-changing geopolitical, security and economic Big Picture.

President Xi Jinping’s Chinese Dream hymn, also portrayed as “the great rejuvenation of the Chinese nation,” is strictly linked not only to Made in China 2025, internally, but also, externally, to the BRI, the organizing concept of Chinese foreign policy for the foreseeable future.

One of the masterminds of this trade wrangle, Peter Navarro, has warned that “China’s investment in strategic technologies may ultimately pose the gravest danger to America’s manufacturing and defense industrial base.” He argued that “tariffs will form a critical line of defense against predatory trade practices China has used to the detriment of American industries.”

The apparent reason for the trade war is the size of the US trade deficit with China, but the tensions between these two countries are rooted less in deficit figures than in high-tech and geopolitical competition

There are few factors, after all, besides trade disputes that compel these two countries as leading superpowers to exercise multifaceted cooperation for ensuring global peace, stability, and prosperity. To the contrary, the mistrust and antagonism that could be triggered by this trade war may ultimately prompt an unexpected incident.

This rabble-rousing trade dispute could instigate China to scale back from the existing postwar order and take more overtly proactive measures to induct an alternative platform of global governance – which many observers believe is already underway, given the establishment of the Asian Infrastructure Investment Bank (AIIB), Shanghai Cooperation Organization (SCO), Forum on China-Africa Cooperation (FOCAC) and so on.

In the long run, China could tend to construct other exclusionary international organizations as alternatives to the existing Western- dominant United Nations and Bretton Woods Institutions. By doing so, China may more proactively attempt to drive wedges between the United States and long-standing allies by casting Washington as an inconsistent and unreliable steward of world order and asserting that Beijing is better suited to adapting a system to contemporary geopolitical realities, and make a more concerted push to challenge Washington on ideological grounds.

On the Korean Peninsula, where the second summit between North Korean leader Kim Jong-un and South Korean President Moon Jae-in raised tremendous hope for peace among Koreans, that hope could fade away if Beijing undercuts the Trump administration’s “maximum pressure” campaign on the North.

On the brink of the trade war, US Secretary of State Mike Pompeo testified that there had been a “modest amount” of backsliding in China’s enforcement of multilateral sanctions on Pyongyang, acknowledging that the Chinese were “not enforcing control over their cross-border areas as vigorously as they were six or 12 months ago.”

In addition, by sending the Communist Party of China’s third-ranking official Li Zhanshu to the celebrations of the 70th anniversary of North Korea’s founding, Beijing sent a cautionary message to the US, as Mao Zedong did by fighting shoulder to shoulder with North Korea in 1950, setting up a relationship once described as being “as close as lips and teeth.”

In the future, China could also decline to join any US-initiated efforts to sanction the Iranian regime. It might go even further, boosting energy ties with and increasing arms sales to Tehran.

Besides, China is expanding the scope and depth of its alignment with Moscow; it joined Russia’s biggest military exercise in 40 years, which many experts viewed as a challenge for the US foreign-policy objectives in the Middle East and Eastern Europe.

It could also accelerate its ongoing militarization of a crucial maritime chokepoint, the South China Sea; more aggressively press its claims in the East China Sea; and increase penetration for an attack on Taiwan, appreciating that the United States, which is already militarily overstretched, has little desire for an armed confrontation with the country possessing the world’s second-largest economy.

Moreover, China’s economic strength relative to the United States’ has increased significantly over the past decade, and Chinese military valor will follow the economic one as well. This notion was echoed in President Xi’s assertion to US Defense Secretary James Mattis in June: China won’t yield “even one inch” of territory that the country’s ancestors left behind. In other words, expect an increase in both Beijing’s ability and willingness to play this trade war in the broader spectrum, notably the security areas where the US is in a sensitive position.

Trump may well want to accelerate this trend, but the potential security consequences of doing so should give his administration pause.

Anu Anwar

Anu Anwar is a fellow at the Faculty of Arts and Sciences and a non-resident associate at the Fairbank Center for Chinese Studies at Harvard University. He is pursuing a PhD at the Johns Hopkins School of Advanced International Studies.

7 replies on “How China could respond as trade war heats up”

Comments are closed.