Will the Trump Trade War Lead to a Cold War with China?

Flag of the People's Republic of China. Image by 古水.

In Aesop’s fable, “The Two Frogs” (Fables of Aesop), summer’s heat dried up the pool in which two frogs resided. As a result of the loss of their habitat, the frogs left in search of a new home. Upon the way, they came upon a deep well filled with water. “Let us descend and make our abode in this well,” the first frog advised. Being risk-averse, the other frog declined, expressing the worry that should the well’s water evaporate, they might wind become trapped.

Blinded by mercantilist illusions of shrinking the nation’s chronic annual trade deficits with China, which have exceeded $300 billion each year since 2014 (Bureau of Economic Analysis), President Trump leaped into the well without looking. He dismissed economists’ warnings of the inherent economic dangers. He reasoned, “Trade wars are good, and easy to win.” (CNBC)

The Trump Administration has now imposed multiple rounds of tariffs on Chinese products. China has retaliated in tit-for-tat fashion each time the U.S. imposed new tariffs. China has also initiated cases against the United States at the World Trade Organization (WTO).

The tariffs associated with President Trump’s trade attacks against China amount to a regressive tax hike on the American consumer, as the associated price increases consume a larger share of lower-income families’ earnings. Business supply chains and future investment decisions are also adversely impacted. Over time, the Trump trade policies could significantly undercut the nation’s economic growth (Federal Reserve).

The economic fallout will ultimately affect all American consumers, employees, and companies, directly or indirectly. However, as far-reaching as the economic costs associated with the Trump trade war might become, the long-term geopolitical risks could loom much larger. If a risk-unaware and often impulsive Trump Administration overplays its hand in the face of all but certain Chinese retaliation to each new round of tariffs, events could eventually spin out of control, leading to a sequence of developments that lay the foundation for a full-fledged Cold War with China.

Arguably, no recent American foreign policy choice has been more short-sighted and consequential than President Jimmy Carter’s fateful decision to abandon Shah Mohammad Reza Pahlavi in 1979 in the face of an intensifying Iranian Revolution. Following the Shah’s ouster, a radical revolutionary regime took power in Tehran. The consequences of that outcome continue to shape and destabilize the Middle East today. A Cold War with China, especially if China evolves into an economic, military, and political superpower, would have the potential to be far more momentous than Carter’s historic blunder.

At present, China is confused by Trump’s actions. China does not fully understand what President Trump wants, especially as it relates to rules and their consistent application. Wang Jisi, President of the Institute of International and Strategic Studies at Peking University, explained in the July/August 2018 edition of Foreign Affairs:

Some U.S. watchers in China, myself included, find the country we have studies for years increasingly unrecognizable and unpredictable…

The way the Trump administration is wielding U.S. power and influence is bewildering to Chinese political analysts. In recent years, Americans have often asked China to follow the “rules-based liberal international order.” Yet Washington now has abandoned or suspended some of the same rules that it used to advocate…

In cases where one party’s conduct produces confusion, there is opportunity for correction. In ambiguity, opinions remain subject to change and judgments remain fluid. However, once ambiguity dissipates and assessments harden, flexibility gives way to rigidity. In turn, rigidity can lead to confrontation.

President Trump has little conception of international diplomacy, the actual evolving bargaining relationship between China and the United States, and the difficulties inherent in winding down trade wars when such policies raise fundamental questions that extend beyond economic considerations. The intensity or duration of such trade wars can nurture bad faith that undermines the degree of trust necessary to forge binding agreements, much less sustain them. Intense and enduring trade wars can also confirm worst-case hypotheses about the actual goals that underpin those disputes. In China’s case, the basic question concerns whether the United States seeks to “contain” a rising China.

In an op-ed published in the June 13, 2005 edition of The Washington Post, former Secretary of State Kissinger warned against temptations to try to contain China. Kissinger wrote:

It is unwise to substitute China for the Soviet Union in our thinking and to apply to it the policy of military containment of the Cold War…

Preemption is not a feasible policy toward a country of China’s magnitude. It cannot be in our interest to have new generations in China grow up with a perception of a permanently and inherently hostile United States. It cannot be in China’s interest to be perceived in America as being exclusively focused on its own narrow domestic or Asian interests.

Will China yield to the deepening Trump trade assault? Such an outcome appears unlikely.

In On China (The Penguin Press, 2011), Kissinger recounted that back in 1991, Chinese President Jiang Zemin told him:

[W]e never submit to pressure. This is very important [spoken in English]. It is a philosophical principle.

Since then, China’s stature on the world stage, its economic and military capacity, its overall confidence in its global position, and its aspirations have grown markedly. China’s near-automatic retaliation to each trade-related move by the Trump Administration provides a convincing case that China won’t yield under Trump’s pressure. There will be no “easy” victory for the Trump Administration.

Face-saving talks aimed at a good faith resolution of legitimate issues, rather than the pursuit of opportunities to score political points or achieve artificial trade balance targets, can still bring about a positive resolution of the U.S.-China dispute before events outrace the capacities of political leaders to manage them. Whether the Trump Administration will take its “off ramp” while it remains available is uncertain.

If not, the Trump Administration may wind up having unleashed a destructive process that could, with the passage of time, lead to the next Cold War. Such a Cold War would likely play out when the U.S. faces greater fiscal constraints, a reduced military advantage, and weaker ties to its allies than had been the case during the Cold War with the Soviet Union.

As Aesop’s “The Two Frogs” makes clear: Look before leaping.

About the opinions in this article…

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About Don Sutherland 72 Articles
Husband. Dad. American. Believes in America on account of its Constitution, ideals, and people. Character, principle, truth, and empirical evidence matter greatly everywhere, including politics and public policy.