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Don’t Expect a New Dawn for U.S.-China Trade Relations

Feb 08, 2021

After the turbulence of the Trump years, some foreign observers may be hopeful for a diplomatic reset from the incoming Biden administration. The Trump administration imposed serious tariffs on both China and its own allies, alienated many of the U.S.’s military partners, and engaged in empty saber-rattling whenever possible. While we will certainly see a change in temperament from the Biden administration, incoming officials have signaled not to expect a radical departure from Trump’s policies on trade. Indeed, many of the domestic political calculations that made the Trump administration take up a Sisyphean trade war with China remain relevant today. The era of protectionism and more forceful U.S.-China trade competition thus may be here to stay. 

Trump began his term with a bang, immediately pulling the U.S. out of the Trans-Pacific Partnership (TPP) negotiations, which were a keystone of the Obama administration’s Asia strategy. (Trump would later instruct advisors to look into rejoining that agreement.) Other unilateral moves included crippling the World Trade Organization (WTO), halting a U.S.-Europe trade deal, and engaging in a farcical renegotiation of the North American Free Trade Agreement (NAFTA). The administration imposed sweeping tariffs, not only on a substantial list of Chinese goods, but also on the steel and aluminum produced by the U.S.’s European and Japanese allies. These moves resulted in endless trade negotiations between the U.S. and China—complete with a weekly whipsaw of “will they, won’t they?” reporting—that ended with a minor “Phase 1” truce in the wider war. On balance, these moves provided limited benefits to the U.S. steel industry and a few domestic goods manufacturers, while they harmed most other industries and consumers. 

Biden enters office with the support of many in America’s powerful corporate sectors, in part because of exasperation with Trump’s trade policies, but mostly because he is seen as being less likely to spark a civil war with incendiary rhetoric. This, in and of itself, gives us a sense of the priorities of Biden’s backers. The major pushes are for further domestic stimulus packages, vaccine rollout, and the easing of domestic political tensions—the trade war is hardly being discussed. Given its dysfunctional government and destabilizing society, the U.S. remains internally focused. To further underline this point: today’s ‘terrorist threat’ is not an al-Qaeda located vaguely in the Middle East, but white supremacist groups organized in the U.S. itself. 

To understand the Biden administration’s footing vs. China, we have to consider diplomacy, military policy, and trade policy as a coherent whole. In this sense, we see a balance forming between China-hawks and moderates within the administration. Retired general Lloyd Austin, a relative moderate, beat out Michele Flournoy, an anti-China hardliner, for the Secretary of Defense Post. Incoming Secretary of State Antony Blinken has voiced some support for tariffs and other economic pressure tactics, while hoping for a “reset” of U.S.-China relations more broadly. By contrast, Kurt Campbell—one of the architects of the infamous “Pivot to Asia” and noted China hawk—will serve as Biden’s senior Asia policy advisor. This relative balance in voices suggests that the administration’s policy toward China will vary ever-so-slightly according to the political needs and pressures of the day. Overall, a drive toward an immediate confrontation with China (of the kind envisioned by those like Flournoy) seems unlikely from these officials. 

Given this relative balance between DC’s competing factions, a rapid change in U.S. policy toward China is not going to happen. Indeed, Biden’s incoming administration has signaled that tariffs on both Chinese and even European goods are likely to remain in force. Why? Simply put, tariffs are still seen as politically beneficial in Rust Belt states like Minnesota, Wisconsin, Michigan, and Pennsylvania, which were crucial components of Biden’s electoral college victory. Democrats cannot afford to lose these voters and have no intention of appearing “weak on trade” in 2024. The incoming administration has further stated its intention to use existing tariffs to “maintain leverage” with China in future negotiations. There’s a certain irony here, given that this is a mere rebranding of Trump’s stated strategy on China, tariffs, and the trade war. With the benefit of hindsight, we can thus see that Trump’s aggressive, if erratic, stance on China was not an aberration, but a continuation of the U.S. elite’s overarching drive toward strategic confrontation with China. 

The fundamental conditions that produced the trade war—declining profit rates, product saturation, and chronic overcapacity in key industries—have not changed. Nor has the ongoing economic crisis made free trade and neoliberal economics any more palatable to the U.S. working class. Indeed, traditional U.S. allies in Europe continue to signal their intention to diversify their trading partnerships, including reaching out more to China. Thus, any hope for an end to the trade war is deeply premature. Indeed, while it may seem remarkable, we should look forward to more of the same: endless trade negotiations, and the slow transition toward a more protectionist international order. 

This continuation of the status quo could be upset by any number of international events: most notably provocations from China or its regional rivals, or even from the U.S. Navy’s distinctively aggressive Pacific Command. Washington elites will no doubt continue to try to stoke the public’s distrust of China, as they have done for many years. Nevertheless, it is difficult to imagine the U.S. being effectively mobilized against a foreign foe when the country is so deeply consumed with its own political decomposition. It is hard for headlines about the dangers of China to remain in the news when spectacular political violence at home becomes a commonplace occurrence. An observer might note that similar domestic dynamics have created incentives for diversionary conflicts in other times and places, and that such a danger still clearly remains from today’s United States. As always, if there is going to be U.S.-China rivalry, let us hope that it remains centered in the field of trade policy rather than the open sea.

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