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Economy

Trade War Foretells Broader China-US “Decoupling”

Jun 03 , 2019
  • Li Yan

    Deputy Director of Institute of American Studies, CICIR

The recent 11th round of China-US trade talks has provoked serious frustration. The Trump administration has arbitrarily accused China of rejecting the consensus that had been reached before, with China strongly rejecting the US accusations. China-US trade talks seem to be at risk of totally breaking down. What is even more worrying is that mutual trust has fallen to a new low, while problems in other fields have emerged during China-US confrontation over trade issues. For example, when it comes to science and technology as well as people-to-people exchange, there has been a significant and growing trend of “decoupling” between China and the United States. Since the normalization of China-US relations in 1972, the relationship between the two countries has experienced frequent disputes, but within a condition of overall stability and growing interests binding the two countries together. Chinese leaders used to remark that "the relationship between China and the United States will not be so good, and it will not be too bad."

Under the shadow of a serious trade war, the historical development of China-US relations may undergo fundamental changes — a new turning point toward decoupling and confrontation.

The trade talks are not only a process of readjusting China-US trade interests and reshaping the pattern of economic interactions, but also the first strategic contest between China and the US under the new circumstances of great-power competition. The process and results of this strategic contest will have a profound impact on China-US relations for a considerable period of time going forward. As far as the current situation is concerned, a series of problems triggered by the trade war is highly likely to cast a pall over future China-US relations.

First of all, the success or failure of trade talks will determine whether economic and trade relations will continue to constitute the "ballast" of bilateral relations. In recent years, as the conflicting factors in China-US economic exchange have gradually emerged, the complementarity of trade ties has not been as obvious as in past decades. Competing interests and incompatible contradictions over differing governance systems have gradually become an important part of China-US economic and trade relations. The American business community, which had always supported the stable development of China-US relations, has been complaining about China's business environment in recent years — their perception of economic and trade relations has gradually soured. This is an important example of the changes in China-US ties. If China and the US can reach an agreement this time, the "ballast" of China-US relations still has the opportunity to be further strengthened. But if agreement cannot be reached, or if the trade war continues for a long period of time, it is very likely that the economic and trade ties will become more stumbling block than ballast. Huge setbacks in recent trade negotiations show this major risk.

Secondly, the stalemate on trade talks may trigger the immense risk of a Cold-War-style “decoupling” in the realm of technology and people-to-people exchange. China’s tremendous advances in science and technology in recent years have further hit a sensitive nerve in the US. As a result, attacking China's major tech firms, and its science and technology policies, has become an important means for the United States to exert "maximum pressure" on China during the trade war. There are quite a few American strategic experts who hope to block China's national development and military modernization by cracking down on China's scientific and technological progress. Over the past year, the United States has issued a series of legislative restrictions on exchanges of scientific and technological personnel, to strengthen export control of sensitive technologies, and has also continuously implemented sanctions. The restrictions on personnel exchanges have further spread to people-to-people exchanges in other fields. Chinese students studying in America, as well as think-tank scholars, are frequently harassed by US law enforcement and intelligence agencies. American officials who are extremely unfriendly to China have given extreme remarks that invoked the concept of the "clash of civilizations" and "ethnic conflicts." The specter of McCarthyism is eroding the foundation of people-to-people exchange within China-US relations. Uninterrupted people-to-people exchanges are essential to keeping the relationship on right track. Otherwise, ties will likely drift apart and lead to a Cold-War level of hostility.

This downward trend in China-US relations is largely the result of the Trump administration's shifting policy on China. It is indisputable that America’s strategy towards China has shifted from engagement and hedging to competition and containment. In response to this change, it is foreseeable that China will also have to adjust its policy toward the US accordingly. On the one hand, China will continue to seek improvement in China-US relations and promote a relationship based on coordination, cooperation, and stability. China hopes that the two countries will be able to recognize and accept each other once again, to seek a new model to reconcile with each other, while learning to find cooperation and mutual benefit even amid an atmosphere of competition. On the other hand, China will be also more determined to strike back and counter any pressure from the US. In its US strategy, China is likely to seek policies of “Peace by Strength” and “Peace by Struggle.” Faced with whole-of-government pressure from the US, China will rely on its increasingly powerful national strength and extensive strategic tools of foreign policy to strike back. In sum, both China and the US should learn to live in an era of superpower competition and coexist peacefully in the world, despite mutual distrust.

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