Trump is Shifting From a Tariff War to an Anti-Tech Non-Tariff Trade Barrier War on China

Today sees the beginning of a further two day round of trade talks between Chinese and US representatives. Although Donald Trump insists that the penultimate deal with China must be signed between himself and President Xi Jinping directly (as opposed to a deal signed by Chinese and US trade officials), this week’s talks are vital because they represent what is ostensibly the last high level meeting before the artificially imposed (by Washington) deadline of the 1st of March, after which time Trump has promised to impose a further set of tariff increases on Chinese imports to the United States, unless a final deal is agreed to sometime in February.

Trump has attempted to attain domestic political capital through his emotionally driven hostility towards China. This hostility has expressed itself on multiple fronts, with the trade war being the most prominent. Now though, due to the particularities of the US political process, it is looking increasingly certain that most of what Trump does between now and November of next year will be designed to win himself a second presidential term. As such, Trump needs as many visible “victories” as possible.

Insofar as this is the new political reality in America, Trump has already set the stage for the US to declare a full victory over the Daesh terror group in Syria and Iraq whilst later this month, Trump will hold the second ever summit between a sitting US leader and a DPRK leader. The Kim-Trump summit to be held later this month in Hanoi, looks to build upon the good will established last year during the Singapore Summit and ideally will speed up the peace process from the perspective of a DPRK eager to trade with the wider world and a US keen on seeing a more rapid de-nuclearisation process unfold.

The final big “victory” Trump seeks to achieve is more accurately called a compromise – one that will end the trade war which he himself instigated against China. Although trading disputes end with compromises rather than the kind of victory that one might recognise in a military conflict, China is perfectly at ease with the fact that Trump wants, needs and will likely declare a “victory” against China. This is the case because insofar as China’s leadership is concerned, the most desirable outcome is a win-win trade agreement that will achieve mutual openness in terms of bilateral trade.

There remains little doubt that under Donald Trump, the US plans to use ever more non-tariff barriers against Chinese hi-tech industries in order to stifle free market competition between American and Chinese firms. This is the fundamental reason why the US instructed Canada to kidnap Meng Wanzhou as an attempt to intimidate the leadership of the company Huawei. It is furthermore the reason why the US is making it difficult for Chinese scientists to get American visas. It is also the reason why the US is pressuring its closest allies to ban Huawei technology and it is why Donald Trump just signed an executive order which attempts to turn China and the US into rivals in the field of artificial intelligence (AI), as opposed to potentially close partners.

None of this fits in with China’s desire to see the world as a whole embrace win-win cooperative endeavours in the fields that will power the future, but nevertheless, China accepts that this is America’s long term plan, assuming Trump wins another election in 2020. However, while Donald Trump has declared his country to be a rival of China across futuristic hi-tech sectors, when it comes to the products of today, American businesses need both Chinese products as well as assured access to Chinese markets. All the while, American farmers have been hit especially hard by Trump’s trade war. Hence, the all important rural demographic in middle America needs a speedy resolution to the trade war, whilst Donald Trump needs the votes of rural America in order to win in 2020.

Because of this, it would appear that by allowing something resembling normal trading conditions between the US and China to resume when it comes to the goods of the present, Donald Trump can claim “victory” in the trade war whilst simultaneously waging a war against the Chinese technologies of the future through a series of non-tariff trade barriers which amount to something of an embargo against Chinese hi-tech.

In many ways, such a reality demonstrates the very different mentality of Donald Trump when contrasted with China’s leadership. China is busily engaged in pivot away from an economic model predicated on mass production to one that prioritises hi-tech innovation, scientific research, medical innovation, high-quality production of consumer goods, automation and artificial intelligence. As part of this drive towards quality, innovation and futuristic technologies, China is opening its markets to more imported goods than at any time in its modern history, whilst China is also allowing for supreme flexibility in flow of investment capital which continues to see China stand as the global leader in FDI (foreign direct investment).

By contrast, in Trump’s America, a pro-tariff zero-sum mentality appears to want to turn back the clock to an age of old fashioned industry that the US itself formerly killed off through over regulation and which China is now voluntarily shifting away from in order to focus on more future driven sectors. In this sense, Trump wants to take America’s economic model on a nostalgia trip whilst China is firmly set on welcoming, promoting and cultivating the industries that will lead tomorrow’s global innovation.

In a more rational world, the two largest economies would cooperate in both new and old economic sectors, but as things stand, Trump has come to represent the old while China is making strides in all that is new.

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