Will America or China Prevail in the Trade War?

Friday, November 30, 2018
Image credit: 
Poster Collection, US 3475A, Hoover Institution Archives.

Image credit: 
Poster Collection, US 3475A, Hoover Institution Archives.

While the Constitution vests in the Congress the power to declare war, American presidents wield great discretion in initiating hostilities. Lyndon B. Johnson dribbled troops into combat in Vietnam in a series of halfway measures that led to disaster. After taking care to build a broad alliance, George H. W. Bush ordered the assault that threw the Iraqi forces out of Kuwait in 1991. His son, George W. Bush, orchestrated the invasions of Afghanistan and Iraq, after gaining the support of Congress. And recently, without involving the Congress, President Donald Trump has shifted the field of battle to economics by declaring a trade war against China.

By so doing, he has initiated a drama of historical proportions, with consequences far beyond the fracas about tariffs. Looking out several decades, it is China—not Russia, North Korea, or Iran—that is emerging as America’s superpower adversary. President-for-Life Xi Jinping and his authoritarian regime have claimed sovereignty over the 1.3 million square miles of the South China Sea, three times the size of the Mediterranean. China has constructed a chain of forts with anti-ship missiles to enforce the claim. Xi has announced a plan to achieve high-tech dominance over the United States by 2025.

In its “Belt and Road Initiative,” China is offering long-term infrastructure loans to developing nations. As the loans default, China acquires ownership over ports and leverage over impoverished governments. The U.S. has labeled this as “predatory economic behavior” intended to colonize poor nations. “Do not accept foreign debt that could compromise your sovereignty,” Pence told leaders at the recent Asia Pacific Economic summit. “The United States deals openly and fairly, and we don’t offer a constricting belt or a one-way road.”1 So great was the friction between China and the U.S. that the summit ended with no communiqué on world trade. The twenty-one nations in attendance accounted for sixty percent of the world’s economy.

Former Treasury Secretary Hank Paulson, previously an advocate of close ties with China, recently said, “Economic tensions are reaching a breaking point… If the US and China don’t resolve their differences, the world will face a systemic risk of monumental proportions.”2 What are these economic differences? Simply put, for two decades a series of American presidents have tolerated rampant Chinese hacking, the massive theft of intellectual property, and one-sided tariffs.

President Trump has declared all this must end. President Xi has refused to moderate China’s behavior. So will President Trump back down and accept a fig leaf from Xi? In terms of economic and military leverage, America currently is playing a much stronger hand. But Mr. Trump has not brought together a global alliance, although it is equally in the interests of Japan and Europe to modify China’s budding sense of manifest colonial destiny. And domestically, it is not clear whether the Democrats will support or undercut his efforts to rein in China.

The support of American corporations is equally opaque. Google, for instance, has designed a search engine that complies with Beijng’s insistence to block information about human rights, religion, and other concepts offensive to the regime. Google’s chief executive Sundar Pichai sanctimoniously said, “We are compelled by our mission [to] provide information to everyone, and [China is] 20% of the world’s population.” Yet while sharing high tech with China, Google refuses to work with our own Defense Department.

Google’s hypocrisy drew a sharp rebuke from General Joseph Dunford, the Chairman of the Joint Chiefs of Staff. “I have a hard time with companies,” he said, “that are working very hard to engage in the market inside China...then don’t want to work with the U.S. military. I just have a simple expression: ‘We are the good guys.’”

We are witnessing is a high-stakes showdown with ramifications far beyond economics. Rep. Gerry Connolly is a Democratic member of the House Foreign Affairs Committee. Commenting after the Asia Pacific Economic summit, he said, “If China wants to somehow assert that, no, it and only it is the power in that region, they are going to have a very serious problem with the United States. Japan made that mistake. They paid a terrible price for it.”

America either employs its leverage and accepts some economic pain and market losses in order to tamps down China’s professed global ambitions now, or lives later with an international system less amenable to American values and interests. It remains to be seen whether “the good guys” will stick together.


 

1New York Times, “Pence and China Stake Out Dueling Positions,” November 18, 2018, p. 11.
 
 2 New York Times, “The Peril of Trump and Xi,” November 18, 2018, Sunday Review, p. 9.