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Opinion | US-China trade war is more about geopolitical rivalry, such as in the South China Sea, than soybeans
- The decoupling of the American and Chinese economies would not only have grave economic consequences globally, but also unleash unfettered US-China rivalry. Beijing needs to make strategic, not simply trade-related, concessions to avoid this
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Why you can trust SCMP
As Chinese and American trade negotiators meet in Washington to try to forge an accord on trade, observers are largely focused on the countries’ economic disagreements, such as over China’s subsidies to its state-owned enterprises. But to think that an agreement on trade will protect the world from a Sino-American cold war would be as premature as it would be naive.
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Of course, a trade deal is highly desirable. The collapse of trade talks would trigger a new round of tariff hikes from 10 per cent to 25 per cent on US$200 billion of Chinese goods exported to the United States, driving down global equity prices and spurring businesses to move more of their activities out of China. Amid tit-for-tat tariffs, bilateral trade would plummet, and the unravelling of the US-China economic relationship would accelerate, creating widespread uncertainty and higher costs.
But even if a comprehensive agreement is reached – either before March 1 or a few months from now – that unravelling will continue, albeit in a more gradual and less costly way. The reason – which many investors and corporate executives have failed to recognise – is that the trade war is not fundamentally about trade at all; rather, it is a manifestation of the escalating strategic competition between the two powers.
True, the US has legitimate complaints about China’s trade practices, including its violations of intellectual property rights, which, after more than a decade of failed diplomatic engagement, warrant a tougher stance. But if the US and China were not strategic adversaries, it is unlikely that the US would initiate a full-blown trade war that jeopardises trade worth over a half a trillion dollars and billions in corporate profits. While China may lose more from such a conflict, American losses will hardly be trivial.
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The US is prepared to sacrifice its economic relationship with China because the risks posed by the two powers’ conflicting national interests and ideologies now overwhelm the benefits of cooperation. At a time when China, which has been rapidly gaining on the US in terms of international influence, is pursuing an aggressive foreign policy, America’s emphasis on engagement is no longer tenable.
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