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Economy

Trump’s Protectionism Provokes Global Anxiety

Jun 26 , 2019
  • Wu Zurong

    Research Fellow, China Foundation for Int'l Studies

To make America great again—or “keep America great,” as Trump’s reelection slogan goes—in plain language means effectively strengthening America’s status as the world’s sole superpower. This is the Trump administration’s overall foreign policy goal. To achieve this goal, President Trump has adopted a radical approach in dealing with international affairs, breaking away from previous administrations. One of his greatest missteps is his China strategy: his unprecedentedly unfriendly actions follow a zero-sum logic. He ostensibly believes that when China, as the second largest economy in the world, has been successfully contained or defeated, America’s unipolar position will have been strengthened and guaranteed for many years to come. As President Richard Nixon came to China in 1972 to promote US interests by beginning friendly Sino-US relations, Trump’s China policy has been called the “reverse Nixon” by the US media. It has worried China, the US, and the rest of the world that open hostility, not witnessed in the past 47 years, has emerged in Sino-US relations in the last two and a half years since Trump became president.

First, the trade war unilaterally imposed by the Trump administration on the two countries has been going on for more than a year, with growing harm to China, the US, and the rest of the world. Worse still, no one is sure that a mutually beneficial and win-win trade agreement is in reach anytime soon — things may even take a turn for the worse. There have been differences and disputes in trade between the two countries in the past, but never with such serious damage to both countries and the world.

Second, the trade volume between the two countries has started to decline. According to Chinese customs statistics, in the first five months of 2019, bilateral trade fell by 9.6%; meanwhile, New York Federal Reserve economists estimate that an 8% year-on-year growth rate in Chinese imports in October of 2018 flipped to an 18% decline in March of 2019. Over the past 47 years, bilateral trade has kept on growing except in 1982-1983 and 1990 (due to a bilateral trade dispute over textiles and US sanctions respectively).

Third, Chinese investment in the US has sharply declined after a rapid increase in the several years before Trump became president. According to a report by the law firm Baker McKenzie, Chinese direct investment in the US plummeted by 83% in 2018.

Fourth, unreasonable export restrictions or sanctions have been imposed unilaterally by the US on ZTE and Huawei, two large global telecommunications equipment manufacturers, along with dozens of other Chinese companies.

Fifth, the number of Chinese tourists and students who visit or study in the US has started to decline. In the past 47 years, this number has been always on the increase. Under the pretext of “countering espionage,” the Trump administration has set up new obstacles to hinder bilateral cooperation and exchange in the realms of tourism, education, and culture. Chinese students who want to study in the US have been encountering visa restrictions, prolonged visa review times, shortened length of visas, and a rising rate of visa rejections. Some Chinese scholars in social and natural sciences have seen their 10-year visas cancelled.

Sixth, the US has undertaken unprecedented high-level official exchanges with Taiwan. On December 2, 2016, Tsai Ing-wen, leader of the Taiwan region had a short telephone conversation with Trump, then the US president-elect. Since 1979, no US president or president-elect had talked directly with the leader of the Taiwan region. In May 2019, National Security Advisor John Bolton met David Lee, secretary-general of the Taiwan Security Council who was visiting the US — since 1979, neither had a US national security advisor ever met with senior official from Taiwan.

Then there are other US provocative moves, such as arms sales to Taiwan, infringement on China’s sovereignty and territorial integrity in the South China Sea, and interference in China’s internal affairs under the pretext of human rights, as well as unilateral sanctions against Chinese entities and individuals under US domestic laws. The increase in provocative American actions in the past two years and half have violated the One-China principle and international law, harming bilateral relations and leading people to think that China and the US have embarked on the road of decoupling. But a second thought tells that no such simple conclusion can be reached quickly.

China and the US are the two largest economies in the same global village. They are so closely intertwined that they have already formed a community of shared interests so that any force in the world that wants to separate them will have to go through long, complicated processes with many twists and turns. At present, the two countries’ vast common interests and cooperation still determine the direction of their bilateral relations, in spite of differences and disputes. That’s why China and the US will not be thoroughly decoupled in the long run. As the two largest economies in the world, their strong interactions with each other and with the rest of the world can never be fully broken off. The never-ending changes in Sino-US relations will be marked by replacement of the old relationship by a new one. The current differences and disputes are not going to become dominant any time soon, as the radical approach of the Trump administration is proving to be counter-productive.

Many Americans disagree with Trump that a trade war with China will be short and easy to win. In fact, any policies or actions that damage China-US common interests and close cooperation are unpopular and unsustainable. For example, actions by New Balance, the large athletic footwear manufacturer in the US, show that the so-called consensus on a tough line against China is not static, but changeable. New Balance’s CEO supported Trump in 2016, but now the company has called on the administration to end the tariffs. New Balance has felt the impact of the trade war as the company imports component parts from China.

More importantly, changes in Sino-US relations has an inestimable impact not only on China and the US, but the whole world. When major differences and disputes between the two countries escalate, and have proved insurmountable for a prolonged period of time, a true decoupling process could begin. Warnings of a potential US recession in the second half of 2020 would then not be mere exaggeration to cause alarm—this real danger could cause unavoidable economic pain to China and the rest of the world. Therefore, it is a wise choice for China and the US to continue cooperation and expand common interests, while rationally managing and controlling their differences and disputes for the benefit of the two countries and the world at large.

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