Many trade experts — academics, think tank scholars, and business leaders — have amply covered the economic details and fallout from the current US-China trade battle. The focus here is on some of the political and strategic implications for the United States and China.
Though it is still possible that the two sides will reach an agreement in time for the G20 summit in June, it is looks increasingly likely that both sides are dug in too deeply to avoid a protracted conflict. If that proves to be the case, the world will witness a global experiment pitting a highly organized, though not invulnerable, authoritarian government and society against a freewheeling, somewhat undisciplined yet historically resilient democratic government and society. Early on, Chinese commentators, reflecting a conviction in top Beijing government circles, predicted that China would inevitably win out if an extended conflict were to emerge. They argued that with a tightly controlled society that had often endured pain in the distant and recent past, President Xi Jinping and China could endure and outlast the worst economic weapons the US could muster. These commentators contrasted the perceived weaknesses and instability of democratic societies — frequent elections, volatile swings in public opinion, and the role of interest groups and NGOs as factors inevitably weakening top US political leaders.
As the struggle has proceeded, the analyses of the strengths and weaknesses of each combatant have adopted strikingly different analytic frameworks. For the Chinese, little attention is paid to the political pressures (though some China experts argue that Xi is not completely insulated from Communist Party dissent). The focus is almost entirely economic: Will a slowing growth rate, diminishing foreign investment, rising wages, and a huge debt overhang ultimately force Xi to agree to US demands for structural reforms?
For the US, the analysis is largely devoted to the political situation (though there is a lively debate on the use of tariffs as a trade weapon). With a “Goldilocks” moment — enviable growth rate, low inflation, and historically low unemployment rates — the key question is whether the current administration can persevere. Of particular concern for Trump is the election next year and pressure from powerful interest groups — the business community, farmers, and workers in some key industries — who may demand relief from the negative impacts of the trade war.
These are trade-offs that any American president would face. And while there are particular negative consequences for weaponizing tariffs, any US retaliation against Chinese mercantilist protection (reciprocity of investment, closing off the US economy to specific Chinese companies) would have also had some negative consequences for sectors of the US economy. So yes, there are special circumstances in the American scene at this point — a mercurial, willfully ignorant president, a poisonous, partisan political scene, and deep divisions between Congress and the Executive. But though the domestic scene today is particularly febrile, the underlying conundrum transcends the Trump presidency: Can a democratic polity achieve enough unity of purpose to challenge the discipline of an authoritarian regime equipped with formidable resources and determination?
We are about to find out.
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