American President Donald Trump announced the imposition of additional tariff as of 1 September on the remaining USD 300 billion-worth of Chinese commodities. China quickly expressed a firm opposition to the US attempt to exert maximum pressure on the nation. Many analyses have focused on what impact this move will have on the Chinese economy and China-US relations. Along with this bilateral analytical framework, I also find it necessary to consider why the US has decided to make a move that people generally believe will also influence the American economy.
One-way global dependence on USA: an American myth
Economic globalization has allowed developed countries to achieve industrial upgrading and transfer labor-intensive medium and low-end manufacturing to emerging economies such as China. While China and other countries obtained market access by joining the World Trade Organization (WTO), consumers in the developed countries have been able to enjoy good-quality products at very low prices. Economic globalization had seemed to be making everyone happy until the outbreak of a global financial crisis in 2008. As the crisis was brought to the surface, the differences between Americans who had gained from globalization and Americans who had not gained from globalization widened. Anti-globalization voices became louder and more prominent and political populism soared. Against this backdrop, some Americans started pondering overusing economic globalization and the asymmetrical structure in interdependence to change the situation in which the US is said to suffer losses.
Take the China-US relationship as an example. The cognitive basis for the American decision to impose tariffs on more Chinese products is the belief that economically China has a unidirectional dependence on the US. From an American perspective, in trade, China exports to the US much more than it imports; in hi-tech fields, China relies on the US rather than the contrary; and in finance, America’s global hegemony gives it exceptional means of punishment and deterrence.
Actually, the perception that other players in the global economy have one-way dependence on the US is not solely constrained to the relationship between China and the US. The asymmetric economic dependence on the US that other countries have has led to vulnerability, and it is this vulnerability that the United States has already used in diplomatic leverage before. The withdrawal by the Trump administration from the Joint Comprehensive Plan of Action (JCPOA) with Iran serves as a good example. European countries have created the INTEX trading platform to go around the American dollar while maintaining commercial exchanges with Iran. However, many European companies worry that the US may very well use the global hegemony of the US dollar to exclude them from global capital. The fear of another sanction by the US has rendered the European framework almost useless, which has in turn further fueled the American myth of asymmetric economic domination.
Future of America’s international leadership
After World War II, the US established, on the basis of its absolute military and economic supremacy, a series of global economic institutions — institutions that arguably would have been impossible without the hegemonic leadership of the US. By the 1970s, with the economic rise of Japan and Europe, the economic consequences of the Vietnam War, the collapse of the gold standard system, and the impact of two oil crises, the original hegemonic leadership of the US could no longer match the new structural changes in power. In 1975, G7 met for the first time and officially came into being, ultimately becoming a practical policy coordination and decision-making platform for global economic governance for quite a long time. Although the US is still superior in strength, its role has gradually changed from being one where the US is the hegemon to one where the US’s leadership is based on unilateralism, with multilateral coordination as a supplement.
Whenever the US experiences economic difficulties or whenever other countries and regions suffer an economic crisis, the American unilateralist tendency becomes more obvious. During the US-Japan trade frictions in mid and late 1980s, the US unilaterally demanded Japan to conduct structural reforms, take actions such that the Japanese yen would appreciate, and restrain its own exports — all while there was little mention of structural reforms in America. During the Asian economic crisis at the end of the 1990s, the US made a high-profile demand for drastic structural reforms in Asian countries. After the economic crisis broke out in the US in 2008, it also gradually increased unilateral demands on China and other countries.
The high pressure from America did not turn Japan into the Japan the US wanted. Instead, Japan relatively reduced its dependence on the US economy by expanding domestic demand and developing economic ties with other countries. The high pressure on Southeast Asia in the financial crisis also did not turn the latter into a region with countries that developed along the ideals promoted by the American perspective. Through regional integration, Southeast Asia also reduced its economic dependence on America. China is now the largest trading partner of Japan and most Southeast Asian countries. Europe introduced the euro in the new millennium. Although the Eurozone cannot be compared with the US dollar in the capital market, Europe will, in the long run, also become relatively less dependent on the US. Therefore, every time the US unilaterally exerts maximum pressure, the world is reminded of the fragility of the asymmetric interdependence between the US and other nations. Ironically, this has also become a driving force for the world to try and steer the US leadership towards multilateralism.