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Economy

US-China Trade War: How Did We Get Here?

Feb 14 , 2019
  • Sara Hsu

    Assistant Professor of Economics, the State University of New York

The US and China are currently locked in a trade war amid other tensions, a situation which was unforeseeable just three years ago. Under President Obama, the US-China relationship was viewed as critical and treated with care. Now, under President Trump, China hawks dominate US foreign policy with the Asian nation, with little regard to making real or perceived slights. How did we get to this point, and what will it mean for what Obama referred to as “the most important bilateral relationship of the 21st century”?

When President Obama came into office, the US was already engaging heavily in trade with China. Multinational firms were happily producing goods for export and domestic sales in China. Travel and investment between the two nations was on the rise. China was a critical player in the global economy.

During Obama’s tenure, tensions arose and were tactfully downplayed. First, there was the tension in the South China Sea. China claims over 80% of the territory in the South China Sea and has been reclaiming land and building up islands, despite the protests of other nations. The US has taken issue with China’s increasing domination of these waters, as the US regularly carries out freedom of navigation exercises, which China has challenged. The Trans-Pacific Partnership (TPP) became another point of contention, as it was supported by President Obama, but viewed by China as a US tactic to bring TPP signatories closer to its own trading sphere and away from China’s. The “Pivot to Asia” policy, introduced by Secretary of State Hillary Clinton at the ASEAN Regional Forum held in Hanoi on July 23, 2010, was also viewed by China with suspicion as a way to contain its power. This policy, indeed, aimed to deploy more military forces to the Asia-Pacific region and sought to support other Asian nations in their disputes with China. At the same time, the policy was focused on preserving the US relationship with China.

Some critics viewed Obama as being too soft on China. This group viewed Obama as failing to call out China on its maneuvers in the South China Sea, which can be seen as giving it tacit permission to continue its expansion there. In addition, the pivot, or “rebalance” to Asia was viewed as insufficient, lacking in specificity.

Xi Jinping became president of China in March 2013, and, although he had a steady relationship with President Obama, Xi’s outlook on foreign policy was quite different from that of his predecessor, Hu Jintao. President Xi consolidated power by quashing resistance and became more assertive in China’s efforts to gain prominence in the global economy. His aim to lead global governance,  his ambitions to create the “Chinese Dream,” and his goals for his flagship One Belt One Road policy, have all indicated that he is determined to make China great again.

Enter Donald Trump, equally focused on making America great again. With a record of speaking in blunt and brash terms, as well as a tendency to simplify foreign relations into a set of win-lose relationships, Trump took aim at China, vilifying it for taking advantage of the US in the sphere of trade. Although his arguments against China make little to no economic sense, Trump has been successful in rallying together Americans who are all too afraid of China’s growing prowess and concerned about their own deteriorating standards of living in the US.

Trump’s rise to the presidency resulted from a wave of nationalism that took effect across continents. Under this framework, globalization was the enemy, and foreign relations that were once considered a critical component of previous administrations were seen as undermining American interests. China, due to its size and the ambitions of its newest leader, became the enemy, and all of a sudden, steps were taken to reverse its global economic and technological expansion.

The problem is that the world is so globalized at present that hurting Chinese interests also harms US interests. Trump’s imposition of tariffs on American consumers and producers, including multinationals producing in China, has resulted in rising costs and economic losses. At present, the world is waiting to find out whether the trade war will escalate or whether tensions will die down. If the Trump administration doubles down on Chinese tariffs, unemployment in the US will rise and economic woes for both nations will set in.

Trump’s nationalist ideology might have felt like a necessary antidote to fighting the unseen adversaries of globalization. For a man who sees the world in black and white, and for Americans tired of losing jobs to their cheaper Chinese counterparts, making China the primary enemy of the US is a winning strategy. However, this approach is already backfiring, creating costs in the US and abroad.

What Trump has gotten wrong is that while China is most definitely a rival of the US, it is not a foe. It’s dangerous to position other nations as antagonists, because this opens the door for hostilities to grow. While Obama’s approach to China was far more subtle, it did less harm to the global economy and preserved a key partnership between the two nations. Going forward, it will be challenging to restore this critical connection while also maintaining a healthy rivalry. In all likelihood, even after the political tides have changed, nothing the US will do to check China’s global ambition will be looked upon benignly. The most important bilateral relationship in the world has become a game of brinksmanship, under reactionary strongman politics. So much for globalization.

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