Trump’s Trade War is Coming to an End – But a More Devious Anti-China Trade Policy Looms

Donald Trump has taken to Twitter to declare what appears to be the end of the first phase of his trade war against China. Trump stated:

“I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues. As a result of these very productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!”

Combined with his praise for China’s constructive role in the Korean peace process, it would appear that Trump is going to attempt to ride a wave of victories in Asia, in order to bolster his domestic credentials before Americans go back to the polls in 2020. Of course, in moving towards freer two-way trade with the US, China is in fact doing what it had long desired. Even before Trump was elected in 2016, China aimed to open its markets to more imports and foreign capital than at any previous period in the history of the PRC. As such, the US has actually fallen behind while other industrial powers are seeing their goods enter the Chinese market with ever fewer barriers to trade. Simultaneously, China continues to be a global hub for FDI (foreign direct investment).

Thus, Trump’s “victory” over China is more symbolic than substantive. China wanted to engage in freer two-way trade with multiple partners including the US, in spite of Trump’s provocative trade war. Because of this, it seems that the worst China will have to endure is another drawn out Hollywood style ceremony at Trump’s famed Mar-a-Lago resort (incidentally, the first place that Trump and Xi ever met), in order to accomplish that which would have otherwise been attained at a far more businesslike meeting between Chinese and American trade officials.

Incidentally, in Korea too, Trump appears to be ready to proclaim a unilateral victory, whilst forgetting to mention that both Korean states are fully supportive of the current peace process. This includes trans-Korean support for the necessity of Korean de-nuclearisation and de-militarisation.

Taken as a whole, with his political opponents now in control of the US House of Representatives, Donald Trump is clearly looking to make progress in foreign affairs whilst his domestic agenda is being stifled at home. As such, Trump seeks to soon declare total victory against Daesh in Iraq and Syria, looks forward to making progress during his forthcoming meeting with Kim Jong-un in Hanoi and finally, Trump will declare a “victory” in the trade war whilst hosting Xi Jinping at his Florida retreat.

This however, only tells part of the story in respect of the anti-Chinese trade war. Whilst the anti-China tariffs that Trump brought in over the last year are likely to soon fall or in some cases be axed entirely, Trump clearly has other anti-free trade tricks up his sleeve. 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  barriers to trade, 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.

Although on the 21st of February, Trump Tweeted that he seeks to see the US reclaim its place as the global centre for hi-tech innovation through “competition”, it remains to be seen whether he realises that in order for such competition to be fair, non-tariff barriers must be removed simultaneously to the tariffs that are likely to be reduced in the coming weeks.

 

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