Why Trump's trade war is a blessing in disguise for Chinese leaders
US President Donald Trump greatly escalated his trade war against China last week by levying tariffs on Chinese goods worth US$200 billion, prompting China to return fire with tariffs on US$60 billion of American goods.
As Trump threatens to impose duties on virtually all Chinese imports, many investors and analysts now believe the trade war will be a protracted affair. Jack Ma Yun, the chairman of Alibaba Group Holding, which owns the South China Morning Post, said the dispute could last 20 years.
Some people in China believe Trump may not want a deal on trade at all, as he wants to play the China card to energise and solidify his electoral base in the run-up to the US midterm elections in November and his presidential re-election campaign in 2020.
Trump is increasingly seen in China as a bogeyman who uses trade as weapon to undermine the country's authoritarian regime and contain its rise.
Is he indeed? Let me go against the grain by arguing that the Trump presidency could in fact prove a blessing in disguise for Chinese leaders, as they are deliberating on effective ways to move forward with the economy at a time of great uncertainty " partly fuelled by his trade war.
Over the past few months, Chinese state media have started to portray Trump and the trade hawks in his administration as harbouring ulterior motives to use trade and investment restrictions as excuses to stymie China's progress and derail its efforts to become a world power capable of challenging the global supremacy of the US.
There is a belief Trump wants to play the China card to energise and solidify his electoral base. Photo: AFP
The underlying message is Trump and his cohorts are to blame for the current mess in bilateral ties; some Chinese analysts have even privately expressed hopes that he can be waited out, that the Trump presidency could be an aberration and he could be voted out of office in 2020.
This line of thinking is naive, to say the least. The reality is the current occupant of the Oval Office makes no difference, as the great power rivalries between China and the US are set to define their bilateral ties for decades to come. Four decades after Beijing and Washington restored ties and tried hard to emphasise cooperation over confrontation, the pent-up frustrations and hostilities from both sides have finally come to the fore.
This explains why Chinese analysts or officials visiting the US in the past few years have been dismayed to find out that American elites " officials, businessmen, or people working at think tanks " have nothing but criticism for China. Their grievances go from unfair trade and investment restrictions to posturing in the South China Sea and the theft of US technology and intellectual property " a rare united front in a deeply divided country.
Having said that, China is lucky that Trump became US president instead of Hillary Clinton, for many reasons. For instance, a Clinton presidency would have gone ahead with the Trans-Pacific Partnership (TPP), which deliberately excluded China. The proposed trade agreement would have served the specific geopolitical purpose of isolating China on trade and rallying the signatory countries around the US. This would have put China at a serious economic disadvantage.
The Trans-Pacific Partnership would have put China at a serious economic disadvantage. Photo: AFP
On top of this, because of her record on human rights, Clinton would have made a big fuss of the reports about China's crackdowns on political dissent and recent allegations about the massive re-education campaigns targeted at Uygurs in Xinjiang in the name of combating terrorism and religious extremism. This, again, would have put China in an awkward position internationally.
By contrast, Trump has killed the TPP deal and his administration has not made much noise on Xinjiang.
Meanwhile, Trump's constant moves to antagonise US allies " including the rest of the G7 (Canada, France, Germany, Italy, Japan, and Britain) as well as South Korea and Japan " through disputes over trade or how to share military expenditure have made them scramble to mount their defences against the US. That in turn has dismayed US elites who wish Washington would lead a united front to target and pressure China.
True, some have argued that Trump's problems with America's allies are akin to family squabbles, and once they patch up they would again try to form a coherent strategy to oppose China.
But waning confidence in the US leadership and its apparent withdrawal from the international stage have given Chinese leaders the time and opportunity to expand the country's political and economic influence overseas and recalibrate its foreign-policy approach.
Even more importantly, Trump's trade-war antics and the ensuing intense debates in China have inadvertently served as a much-needed reminder of China's real strength and limitations for Chinese leaders and the people as a whole.
Trump's sanctions of ZTE show how much China lags the US in technological know how. Photo: Reuters
Indeed, ever since President Xi Jinping came to power in late 2012, and particularly after the constitutional change in March which enables him to rule as long as he likes, China's massive propaganda machine has engaged in an unprecedented campaign to strengthen the personality cult around Xi " partly through excessive praise of the country's achievements in manufacturing and technology. The most notable examples were the showing of documentaries including Amazing China and the unveiling of "Made in China 2025", an ambitious plan to see China lead key hi-tech sectors including artificial intelligence and robotics.
US officials have used such propaganda to put more pressure on China, and this pressure has made many Chinese people more clear-headed about the country's own pitfalls and the folly of over-the-top propaganda.
The ease with which Trump has shown he could put ZTE " one of China's biggest telecommunications companies " out of business is also a telling example. The ensuing debate has revealed that China is at least 30 years behind the US in terms of overall technological and manufacturing know how.
This has prompted China to tone down propaganda over its so-called achievements and undertake a more realistic approach towards the trade war with the US.
Another development is that following pressure from the West, particularly the US, China is stepping up its efforts to open up to overseas investment " for instance its recent decision to allow Tesla to open up a wholly owned factory in Shanghai to produce electric cars, with Chinese banks agreeing to provide the funding. Chinese officials may not want to publicly acknowledge this, but history has shown that whenever China's reforms are stalled, external pressure helps move things along. ■
This article originally appeared on the South China Morning Post (SCMP).
Copyright (c) 2018. South China Morning Post Publishers Ltd. All rights reserved.
