Trade war tensions continue to exacerbate uncertainty in the business community in both the US and China. Retaliatory measures have proven swift and wide-sweeping. Following President Trump’s announcement of a 10 percent tariff increase on $300 billion worth of Chinese imports, Beijing allowed the yuan to pass the seven-per-dollar mark for the first time in over a decade. In addition, China has announced that it will be suspending purchases of American agricultural products. President Trump consequently dubbed China a “currency manipulator” – a move previously opposed by the US Treasury Department.
These high-level moves grab headlines and appear to constantly shift with little ability to accurately predict next steps. While the moves of top leadership can prove erratic, voices lower down on the totem pole in both countries are formulating their own opinions and proposals based on more specific and more easily attainable objectives. In the US, a range of politicians across the aisle have expressed either support or condemnation of tariff measures. On one end of the spectrum, Marco Rubio, Republican senator from Florida, has grown increasingly vocal in his assertion that China is attempting world domination. On the other hand, Trump ally Kevin McCarthy has supported Chinese business operations in the US, motivated by successful examples of joint projects in his home district in California. Against the backdrop of fast-paced trade war measures, these voices often fade out of focus. In reality, individual American lawmakers hold considerable sway in developing policies that impact continued contact with Chinese businesses. Delving into the motivations behind the varied perspectives of the China-US trade war creates a more complete narrative for domestic responses to trade war measures, suggesting potential avenues for future solutions.
Support or opposition to tariffs on Chinese products do not fall neatly along party lines. US senators and representatives on both sides of the aisle differ in their interpretation of how American economic interests align with China's trade and development strategy. Despite these divergences, American lawmakers fall roughly into three camps regarding China: 1) China's rise constitutes efforts at global domination, and tariffs are an appropriate way to protect American interests; 2) constraints against China are welcomed, but Trump's methods are not the most effective; and 3) the benefits of cooperating with China exceed the costs.
Camp 1: China is exploiting the global order, tariffs are necessary
Marco Rubio and presidential hopeful Elizabeth Warren are noteworthy members of this camp. Despite considerable ideological divergence in their views on economic and social policy, Rubio and Warren are united in their strong condemnation of Chinese economic and diplomatic behavior. Rubio's basic argument is that China's strategy for technological development (as outlined in “Made in China 2025”) and foreign policy strategy directly harm American businesses. Under his direction, the US Senate Committee on Small Business and Entrepreneurship released a report entitled "Made in China 2025 and the Future of American Industry." The report blasted China's industrial strategy for exploiting strategic weaknesses in the international system and for using unfair development strategies. In addition to MIC 2025, Rubio has also attacked the Belt and Road Initiative, arguing that BRI is a ploy to court unsuspecting foreign governments.
Senator Elizabeth Warren shares similar objections to China's economic strategy but has stated that the US should make adherence to human rights standards a prerequisite for easing economic tensions. In March 2018, Warren explicitly referenced the need to "respect basic human rights" as a key component needed before the US could consider further economic integration with China. She also joined a bipartisan coalition (including Rubio) in November to express concern to President Trump about Chinese influence on American media and academic institutions.
Camp 2: US-China relations need adjustments, but tariffs may not be the answer
In the second camp are those who support additional constraints or adjustments in the US-China relationship but are not sold on Trump's strategy. Examples of this school of thought include Democratic Senators Tim Kaine (D-VA), Mark Warner (D-VA), and Sherrod Brown (D-OH). Their basic contention: President Trump's China strategy not only doesn't address long-standing issues but also harms American economic interests. Argues Kaine, “His instinct isn't wrong, but what he's doing to solve the problem is actually only most painful for Americans, not the Chinese.” Warner echoes these sentiments, expressing concern that Trump’s strategy is seeking short-term gains with little attention to much needed structural shifts. Brown is among the most vocal of Trump’s opponents on China trade measures, raising concerns about the impact of tariffs on American industry and agricultural sectors.
Both Kaine and Warner are in part motivated by Virginia’s economic relationship with China. China is Virginia’s top export market for soybeans. Agriculture compromises the largest sector of Virginia’s economy, and soybean exports grew 83 percent from 2017 to 2018. Such economic factors create a practical and personal connection to trade war measures. These senators understand how tariffs impact jobs on an individual level and are therefore more cautious when evaluating Trump’s strategy.
Camp 3: Trade war measures are unreasonable, trade with China should continue
For politicians from states like California, Massachusetts, and Virginia, economic cooperation with China is long-standing and sizeable. The primary difference between lawmakers in camp 2 (Warner or Brown) and camp 3 (Kevin McCarthy) is their level of direct connection to US-China economic cooperation.
As a Trump ally, Kevin McCarthy (R-CA) is an unexpected opponent to Trump-supported tariffs and measures that would block federal funding from contributing to projects involving Chinese companies, yet he has actively resisted such measures in favor of shielding the business conducted between China and his home district in California. This district has worked with Chinese-owned BYD to produce electric-powered buses in line with state aims of increasing sustainable transit options. McCarthy quietly opposed provisions in federal funding bills that would restrict BYD operations. He helped court BYD projects and attended the official opening ceremony of their first plant in Lanchester, California. For McCarthy and local leadership (particularly in states like Massachusetts), regulations and measures against China come with concrete costs to jobs, salaries and job creation opportunities.
Impact and Implications
What is the impact of this domestic divergence on trade war measures? How does this impact what observers can expect moving forward? Despite a small group of lawmakers with more personal economic ties to Chinese businesses, the general consensus seems to show that there is a lack of will to push for resolution. Opportunities for cooperation are limited, even given state-level joint economic opportunities. In addition, rising nationalism among both nations makes discussing any concessions or compromises politically unpopular. These factors combined make the likelihood of a less integrated economic system increasingly likely, as common ground shrinks and substantive improvements in relations remains fragile.