OPINION: The global impact of US-China seemingly endless trade war
The trade war between the world’s two largest economies, China and the US, continues with no any sign or willingness to back down. The two are currently trading blames, each accusing the other of this and that.
Since joining the World Trade Organization in 2001, China has reaped the benefits of globalization in trading and investment. But the US claims that China has managed to reap the benefits largely due to unfair trade practices, forced technological transfers, subsidies for domestic firms and intellectual property theft among others. The US further claims that the Chinese government is becoming increasingly authoritarian transforming China into a surveillance state.
On the other side, the Chinese suspect that the Americans’ aim is to prevent China from rising any further or projecting any power and legitimate influence abroad.
The Americans believe that the world’s second largest economy would seek to expand its influence overseas; that the Chinese will propagate their model as the most efficient one in raising the standards of living and ending poverty – China has lifted more than 700 million individuals from poverty while keeping the much faster pace in reducing poverty in the society.
Regardless of which side has the stronger argument than the other an escalation of trade, technological, geopolitical and economic tensions may have been inevitable. What started as a trade war now threatens to be a permanent state of mutual animosity with no sign of backing down. And the Trump administration’s national security strategy which highlights China as a strategic competitor that has to be contained on all fronts does not help matters either.
Accordingly, the US is sharply restricting Chinese foreign direct investment in sensitive sectors and pursuing other actions to ensure Western dominance in strategic industries such as artificial intelligence and 5G. It is pressuring its partners and allies not to join China’s Belt and Road Initiative as it did when the Asian Infrastructure Investment Bank was established, though it failed on the later.
With this being the case we can simply say that the global implications of Sino-American trade war could be more severe and far reaching and we can never compare them even with a cold war between Soviet and the US. While Soviet was a declining power with a failing economic model and traded a little with the US, China is fully integrated to the global economy and its trade with the US is among the highest in the world and soon will become the world’s largest economy and will continue to grow for a long time to come.
To say the least, a full scale trade war usher the world into a new stage of de-globalization and thus a division of the global economy into two incompatible economic blocs.
In either scenario trade in technology, labour, goods, services, capital, data and the digital realm will become harder wherein Western and Chinese nodes would not connect to one another.
In this balkanized world it is expected that all other countries will pick a side while most governments will try to maintain good economic ties with both. Yet, many of US allies now do business with China (in terms of trade and investment) than with the US. Yet in a future economy where the US and China separately control access to crucial technologies such as AI and 5G the middle ground will be less likely inhabitable. Everyone will have to pick a side and the world may enter into a long process of de-globalization.
Whatever happens, the US-China relationship will be the key economical and geopolitical issue of this century.
Some degree of rivalry is inevitable. But ideally, both sides will manage it constructively allowing for cooperation on some issues and healthy competition on others. In effect, China and the US would create a new international order based on the recognition that the rising power should be granted a chance and a role in shaping global rules and institutions.
The author is a Dar-based economist.
