The United States Is at War

The tone is beginning to change. Until recently, the trade war between Washington and Beijing did not really worry economists. The majority was expecting that an agreement would be reached at some point. The American (and to a greater extent, Western) demands were, on the whole, legitimate: access to the Chinese market for businesses, respect for intellectual property rights, the end of forced technology transfers. No, China was not going to risk undermining its growth and seeing its unemployment rate climb by opposing the Trump administration head-on. The threat of riots was too great. As for the United States, it needed to soften its position a little and take a step toward Beijing. It was not in its interest to break global trade with protectionist measures and foster a recession. That’s the theory, anyway.

Economists are beginning to consider something else. A latent economic war is underway between the United States and Beijing, and a solution will take a long time. Why? China has its own economic agenda and value system. It wants to cut loose and become a solidly middle class country. It’s moving at its own pace. On the other hand, the American drive to contain China in the battle for world leadership is real. A China that wants to cozy up to the rest of the world with the Belt and Road Initiative. A China that also has its eyes on Africa. That goes beyond simple economics.

One element is symptomatic. The presidential election is coming up, but the United States remains totally inflexible. The stages of negotiation have added up with nothing to show, at the risk of plunging the American economy, which has been doing rather well, into the red. President Trump’s inner circle, dominated by the anti-Chinese Peter Navarro, is symptomatic of this new order. In effect, Washington is at war. Nothing more, nothing less.