Contributor Post Created with Sketch. US vs. China Might Not Be a Forever Trade War, But It Sure Feels Like It Right Now


As that great and learned scholar Vizzini once noted, one of two classic blunders is getting involved in a land war in Asia. But trade wars might also qualify. “Donald Trump’s trade battle with China is starting to look like a forever war — a quagmire with no end in sight, no clear path to a resolution and more potential land mines for an already weakening global economy,” Bloomberg’s Shawn Donnan argues.

At the very least, President Trump’s “trade wars are good and easy to win” axiom isn’t playing out. Not only did the president say he’s imposing 10% tariffs on another $300 billion of Chinese goods starting Sept. 1, but Beijing looks like it’s not expecting a resolution any time soon as it lets the renminbi weaken, or “crack seven” in traders parlance. The Financial Times calls the move “a clear sign that Beijing is prepared to use the currency as a weapon and let the trade war drag on.”

And drag on and on and on to where, exactly? Neil Shearing of Capital Economics sees…

a significant risk that the current trade war between the US and China represents the start of a wider backlash to globalisation that ultimately leads to the disintegration of the liberal rules-based system that has governed the cross-border flow of goods, capital, and labor over the past 70 years. It’s even possible that this might lead to an eventual Balkanisation of the global economy, with US- and China-led spheres of influence, each with separate payment systems, regulatory standards, and technological platforms. It goes without saying that this would have much graver economic and market consequences.

One thing making that dire scenario a plausible one is that whatever Trump’s goals — maybe as straightforward as getting a “good deal” but maybe not — Donnan notes that China hawks in Washington see “tariffs as an essential tool in forcing a relocation of supply chains.” Meanwhile, Trump thinks China, rather than American consumers, is bearing the costs of the tariffs. He’s even suggested the tariffs are boosting American economic growth. So let the trade war roll on!

But there’s forever and then there’s forever. I’ve been at least modestly skeptical that US vs. China turns into Cold War 2.0. or a Tech Cold War. As I recently wrote for The Week:

The Cold War was a multi-decade effort of economic, military, and ideological dimensions — given force and vitality by intellectuals and politicians across the political spectrum — where the benefits and costs were clearly spelled out to the American people. And America was not fighting alone: Global institutions, including NATO, were critical for victory, which the cold warriors always knew would be the case. The Reagan administration’s famous 1982 national security strategy memo stressed the value in “strengthening existing alliances” and promoting “a well-functioning international economic system with minimal distortions to trade and investment and broadly agreed and respected rules.”

Beyond its nostalgic moniker, the tech cold war lacks almost all the critical aspects of the successful original. For starters, it’s unclear whether the current American president views the Huawei ban or follow-up restrictions on other Chinese firms as anything more than a short-term tactic to get a better trade deal with Beijing. . . . Even assuming Trump has signed on to fighting on this new front, any sort of sustained economic conflict requires serious explanation to the American public. They should understand the broad strategy, the clear goals, and the potential costs. . . . And while the U.S. attempts to work less with China, plenty of nations might deepen their ties. . . . The more you look at the idea of a tech cold war — from the lack of serious planning to the problems in disentangling the two ecosystems, the more fanciful it seems.

All that said, I’m not sure how exactly the current war of attrition ends even as the trade conflict turns into a currency conflict, too.

Published in Economics
Like this post? Want to comment? Join Ricochet’s growing community of conservatives and be part of the conversation. Get your first month free.

There are 7 comments.

  1. I Walton Member

    We did fine when China didn’t play trade. Now they do and are conducting a war with us. Trade is far more complex, global and nothing is obvious, but it’s a trade war and the Chinese are waging it. We made big mistakes treating them as if they were going to behave like the rest of us. We need to return to basic rules and exclude those who don’t buy in. It’s not easy to disentangle these matters. The Japanese played with their own rules for decades and we knew they weren’t playing the same game but couldn’t nail them in the WTO. We have to treat these matters with seriousness because unlike Democrat talking points and focus, these require adult engagement. We need the Democrats to grow up and join the adults because we face some real challenges.

    • #1
    • August 5, 2019, at 2:52 PM PDT
  2. Unsk Member

    Moderator Note:

    Ad hominem and reading in bad faith.

    Agree with I Walton. 

    I see no way out of a full disengagement with China. Much of what Trump wanted was just for China to comply with what they already agreed upon to do upon admission to the WTO, which Jim much to your discredit you failed to mention. China has cheated in thousands of ways which are unconscionable and are almost impossible to unwind. They also have used the huge trillion dollar largesse gained by our trade relationship to build a very threatening military posture that we absolutely must take down and neutralize. Just today their proxy, North Korea launched some more missiles. We need to cut them both off at the knees, arm Taiwan to the hilt, and rub those collective noses in it. Screw them. 


    • #2
    • August 5, 2019, at 6:02 PM PDT
    • 1 like
  3. Unsk Member

    Also Jim, you failed to mention that today there were very violent riots in Hong Kong because those people know they are on the verge of being ground under by the Chinese Dictatorship. You also failed to mention that the Chinese people are no longer buying western products- so what is the point? There is no trade relationship worth saving and the Chinese did that to themselves. 

    • #3
    • August 5, 2019, at 6:08 PM PDT
    • 1 like
  4. James Gawron Thatcher
    James Gawron Joined in the first year of Ricochet Ricochet Charter Member

    Unsk (View Comment):

    Also Jim, you failed to mention that today there were very violent riots in Hong Kong because those people know they are on the verge of being ground under by the Chinese Dictatorship. You also failed to mention that the Chinese people are no longer buying western products- so what is the point? There is no trade relationship worth saving and the Chinese did that to themselves.


    I think Unsk is on target here. How realistic is it to imagine that we can continue to subsidize blindly a Marxist economy. We thought they would slowly do away with Marxism instead they are doubling down. If you can watch Hong Kong being ground under Bejing’s heel then you have either a stronger stomach than I do or perhaps no conscience whatsoever. I don’t believe you if you claim the second trait.

    I am not suggesting a policy of only stick and no carrot but we are in for a bumpy ride with the Chinese no matter what and I don’t think it is Trump’s fault. In fact, no matter what our aristocracy of punditry says, more support for Trump might very well convince the Chinese that they are the ones who must yield.



    • #4
    • August 5, 2019, at 6:51 PM PDT
    • Like
  5. RushBabe49 Thatcher

    Step one, kick China out of the WTO. They are not, and cannot be a market economy, and never should have been admitted in the first place.

    • #5
    • August 5, 2019, at 9:57 PM PDT
    • Like
  6. Front Seat Cat Member

    China’s economic success all goes back to maintaining their military – they control North Korea. They also hold court with Russia and other countries who have no problem seeing the US roles in the world (especially the Middle East) weakened. It concerns me that Trump uses tariffs so frequently – including on the Europeans. It feels like he’s trying to do too many things at once, without the support of Allies. This is getting dicey. 

    • #6
    • August 6, 2019, at 6:33 AM PDT
    • Like
  7. Unsk Member

    More on the Hong Kong Protests and our very good friends according to Jim – The Red Chinese from the Telegraph via Zerohedge:

    According to a spokesman for the Beijing-controlled Hong Kong and Macau Affairs Office, demonstrators are causing “Hong Kong to slide into a dangerous abyss,” adding “As for their punishment, it’s only a matter of time.

    The Chinese government will never allow any acts that challenge national unity, sovereignty or security, he said, sternly reminding residents that the People’s Liberation Army was a “strong and reliable force that defends every inch of its territory.” 

    In a jab at protesters, Mr Yang referred to their main slogan, “Reclaim Hong Kong, revolution of our times,” by reminding them Hong Kong was a part of China, saying, “I want to ask those people shouting this, ‘what of Hong Kong do you want to reclaim? Where exactly do you want to reclaim Hong Kong to?” –Telegraph


    Meanwhile, over 12,000 Shenzhen police officers conducted a publicly broadcasted crowd-control drill – offering protesters a taste of what’s to come. 


    “A drill will be held to increase troop morale, practise and prepare for the security of celebrations, [and] maintain national political security and social stability,” according to police. 

    In live videos of the police drills shown on the Yizhibo network, officers in body armour, helmets and shields confronted groups of people in black shirts and red or yellow construction safety helmets – similar to those worn by Hong Kong protesters – who were holding flags, banners, batons and wooden boards. –SCMP

    • #7
    • August 6, 2019, at 10:57 AM PDT
    • Like