Weeks of shuttle diplomacy between Beijing and Washington have yielded nothing. Illustration: iStock
The US-China trade war has had an adverse effect on the world's second-largest economy. Image: iStock

Eco-geopolitical logic would dictate that the world’s two largest economies should end their trade war. Indeed, it should never have started. The tit-for-tat tariffs are not only hurting both sides, but also those countries – Japan and South Korea, among others – that are involved in the US-centered global supply chain.

According to the US-based Trade Partnership Worldwide, 2 million US jobs would be on the line if President Donald Trump imposes a 25% tariff on an additional US$250 billion worth of Chinese “imports.” The consultancy already found that existing tit-for-tat tariffs have shaved US gross domestic product by 0.37%, put more than 950,000 people on the unemployment line, and reduced real family income by almost $900 annually.

The economic loss should not be a surprise because the majority of Chinese “imports” were in fact “made by America in China.” This amounts to imposing a tax on US intermediate and final products, culminating in raising production costs and consumer prices. Tit-for-tat tariffs caused farm and energy exports to China to decline sharply, culminating in the largest number of farmers declaring bankruptcy in 2018 than at any period since the 1930s-era Great Depression, according to the US Bureau of Statistics.

China is not left unscathed because its GDP growth slowed from 6.8% in 2017 to 6.6% in 2018, according to International Monetary Fund figures. What’s more, the tariffs instilled a sense of economic pessimism, as demonstrated by a fall in real-estate development and factory downsizing or even closures.

Japan and South Korea, whose economies are closely linked to those of China and the US, have been hit hard. Many of the parts in the products of US brands such as Apple are produced in these two and other Asian countries. The fewer iPads or iPhones that are produced, the fewer the parts needed.

Given these losses, there is every reason for the US and China to reach a deal on ending the trade war. On that China seems to be showing leadership, indicating that it will buy substantially more US products, ranging from agriculture to energy, to lower the trade-deficit figures. China has also signaled that it will meet the US halfway in addressing intellectual-property theft and forced technology transfer.

On market access, China is more open than the US. For example, US foreign direct investment (FDI) in China has risen, according to China’s Ministry of Commerce, but Chinese FDI in the US has plunged almost tenfold since Trump ascended to the presidency, from US$45.6 billion in 2016 to US$4.8 billion in 2018, according to a study conducted by the US law firm Baker McKenzie.

The Trump administration, along with the Congress, has routinely blocked Chinese investment for national security reasons. For example, the government prevented the US telecommunications giant AT&T from partnering with Huawei to market the latter’s smartphones in America. So far, there is no credible evidence to suggest the Chinese government has used Huawei or any Chinese telecommunications products to spy on the US or any other country.

Surely the US government must be aware of the trade war’s consequences. Further, its accusations against China are just that, speculations. This raises the question: Might there be another motive for the trade war?

Maintaining US supremacy

History shows that the US wanted to dominate the post-World War II global economic and geopolitical systems. At the 1944 Breton Woods Conference, the US representative, Harry Dexter White, insisted on the greenback being the world’s reserve currency, and that the IMF and World Bank be under US control. On the General Agreement on Tariffs and Trade (GATT), the US practically wrote the rules of tariff reductions.

Some historians belonging to the “revisionist school” argued that the Marshall Plan was meant to strengthen US dominance. The “generous” aid and loans were given only to countries adhering to US values and norms. But the funds had to be used to buy US products. They suggested that while the Marshall Plan helped Europe and East Asia recover from the bombings of World War II, its primary purpose was to block Soviet communist expansion, which it succeeded in doing.

China’s rise is seen as a “threat” greater than that of the former Soviet Union because the Asian giant is nearing parity with the US in economic, military and technological prowess

Fast-forward to today, and China’s rise is seen as a “threat” greater than that of the former Soviet Union because the Asian giant is nearing parity with the US in economic, military and technological prowess. Although China’s military is less advanced and powerful than that of the US, it could inflict unthinkable damage to American lives and property if China were to attack. China is fast narrowing the technology gap and in some cases – fifth-generation telecom technology, artificial intelligence (AI), etc – it has surpassed the US.

Because 5G and AI technologies have both economic and military implications, the US political and security communities are alarmed and determined to stifle China’s innovation advancement. For example, it is not only banning Huawei and other Chinese-made telecom equipment from the US but is also pressuring allies and other countries to do so as well. The US even pressured Canada into arresting Huawei’s chief financial officer on alleged fraud charges when she made a stopover in Vancouver en route to Mexico.

The US is ratcheting up tensions with the Asian giant in the geopolitical area, playing with the “two-China” policy, and introducing legislation allowing high-level government and military exchanges with Taiwan. The latest move is some Republican senators proposing to invite Taiwan’s leader to speak before a joint session of Congress. Meanwhile, the US Navy is stepping “freedom of navigation operations” in the South China Sea and inviting allies to join it.

In short, the US political and security establishments will not allow China to surpass American economic, military and technological supremacy. Senior Trump officials such as Robert Lighthizer, John Bolton and Peter Navarro have said as much. Trump himself said a deal must involve structural changes, meaning the Chinese government must stop subsidizing state-owned or privately owned enterprises’ innovation push.

Made in China 2025

Against this backdrop, it could therefore be argued that a trade deal that is acceptable to the US is China giving up its 2015 “Made in China 2025” initiative, a 10-year industrial policy meant to transform the economy from labor-intensive manufacturing to value-added. To achieve its goal, the government focuses on high-technology products, lavishly funding telecommunications, AI and research and development activities. The policy is working, explaining the “tough” American stances on China.

However, the Chinese government is highly unlikely to give up its “Made in China 2025” policy because that would put it behind the US indefinitely. There is also an extraterritoriality aspect because the US, in fact, is demanding that China surrender its sovereignty, something the Asian giant would not and should not do.

Besides, it is unclear who will be hurt more by the trade war, China or America. Chinese “exports” to the US represent only 4% of China’s GDP and consist mostly of goods “Made by America in China.” What’s more, the amount could be consumed by China’s huge domestic market of 1.4 billion, more than 400 million of whom are in the middle class, a person earning between $12,000 and $72,000 annually. Its successful Belt and Road Initiative involving 80 participating countries is another outlet for Chinese products. Therefore, the Chinese economy would suffer in the short run, but would likely emerge stronger in the medium to long term.

A comment

The US should meet China halfway in ending the trade war, which is hurting the US, Chinese and world economies. The IMF predicts US, Chinese and world economic growth slowing to 2.5%, 6.4% and 3.7% respectively in 2019, 0.2 percentage points lower than 2018 rates, if the trade war persists.

Sadly, the US political and security establishments are more interested in maintaining supremacy than in enhancing the interests of the country and people. Therefore, reaching a deal to end the trade war might not be forthcoming. And even if one is reached, it may not last.

Join the Conversation


  1. Simply want to say your article is as amazing. The clarity for your put up is simply nice and i can think you are a professional on this subject. Well with your permission let me to clutch your feed to stay updated with forthcoming post. Thanks a million and please continue the gratifying work.

  2. Wow, superb blog layout! How long have you been blogging for? you made blogging look easy. The overall look of your site is wonderful, let alone the content!

  3. I’m really enjoying the design and layout of your site.

    It’s a very easy on the eyes which makes it much more pleasant for me
    to come here and visit more often. Did you hire out a developer to create your theme?
    Great work!

  4. I do not know if it’s just me or if everyone else experiencing issues
    with your blog. It appears as though some of the written text within your posts
    are running off the screen. Can someone else please comment and let me know
    if this is happening to them too? This might be
    a issue with my internet browser because I’ve had this happen previously.

  5. I must thank you for the efforts you’ve put in penning this website.
    I really hope to check out the same high-grade blog posts
    by you later on as well. In truth, your creative writing abilities has inspired me to get my own website now 😉

  6. Write more, thats all I have to say. Literally, it seems as though you relied on the video to make your point.
    You definitely know what youre talking about, why
    waste your intelligence on just posting videos to your blog when you could be giving us something enlightening to read?

  7. Please let me know if you’re looking for a author for your blog. You have some really great articles and I feel I would be a good asset. If you ever want to take some of the load off, I’d love to write some content for your blog in exchange for a link back to mine. Please blast me an e-mail if interested. Regards!

  8. I think this is one of the most significant information for me.
    And i am glad reading your article. But want to remark on some general things, The site
    style is wonderful, the articles is really great :
    D. Good job, cheers

  9. Thank you for the sensible critique. Me & my neighbor were just preparing to do a little research about this. We got a grab a book from our area library but I think I learned more from this post. I’m very glad to see such fantastic information being shared freely out there.

  10. Having read this I believed it was extremely enlightening.

    I appreciate you taking the time and effort to put this information together.
    I once again find myself personally spending a lot of time
    both reading and leaving comments. But so what, it was still worth it!

    natalielise plenty of fish

  11. Hi, I do believe this is an excellent website. I stumbledupon it 😉 I may revisit yet again since I saved as a favorite it.
    Money and freedom is the greatest way to change,
    may you be rich and continue to help others.

  12. I together with my friends were looking at the excellent tips and tricks located on your web blog then quickly came up with a horrible suspicion I never expressed respect to the web site owner for those techniques. These young boys became consequently happy to study them and have in effect certainly been tapping into those things. I appreciate you for actually being considerably accommodating as well as for finding these kinds of incredibly good useful guides most people are really needing to learn about. My personal sincere apologies for not expressing appreciation to you sooner.

  13. It is perfect time to make some plans for the future and it is time to be happy. I have read this post and if I could I wish to suggest you few interesting things or tips. Perhaps you can write next articles referring to this article. I want to read even more things about it!

  14. Hello There. I found your weblog the use of msn.
    That is a really well written article. I’ll make sure to bookmark it and
    return to learn extra of your useful info.
    Thank you for the post. I will certainly return.

  15. I love your blog.. very nice colors & theme.
    Did you design this website yourself or did you hire someone to do it
    for you? Plz respond as I’m looking to construct my own blog and would like to know
    where u got this from. appreciate it

  16. Attractive section of content. I just stumbled upon your website
    and in accession capital to assert that I acquire actually
    enjoyed account your blog posts. Anyway I’ll be subscribing
    to your feeds and even I achievement you access consistently quickly.

  17. I’m impressed, I must say. Rarely do I encounter a blog that’s equally educative and amusing, and let me tell you, you’ve hit the nail on the head.
    The problem is an issue that not enough folks are speaking intelligently about.
    Now i’m very happy I came across this in my search for something concerning this.

  18. naturally like your web site however you need to test the spelling on quite a few of your posts. A number of them are rife with spelling problems and I to find it very bothersome to tell the reality however I’ll certainly come back again.

  19. My partner and I stumbled over here coming from a different web address and thought I might as well check
    things out. I like what I see so now i’m following you.
    Look forward to looking into your web page yet again.

  20. My brother recommended I may like this web site.
    He was once entirely right. This put up actually made my day.
    You can not believe simply how a lot time I had spent for this info!
    Thank you!

  21. Hmm it appears like your blog ate my first comment (it was extremely long)
    so I guess I’ll just sum it up what I submitted and say, I’m thoroughly enjoying your blog.

    I as well am an aspiring blog blogger but I’m still new to everything.
    Do you have any recommendations for beginner blog writers?
    I’d really appreciate it.

  22. I was recommended this web site by means of my cousin. I’m now not certain whether or not this publish
    is written via him as nobody else realize such particular approximately my difficulty.
    You are incredible! Thanks!

  23. When I initially commented I clicked the -Notify me when new comments are added- checkbox and now each time a comment is added I get four emails with the same comment. Is there any method you may take away me from that service? Thanks!

Leave a comment

Your email address will not be published. Required fields are marked *