The Irish Times view on US-China relations: the risk of escalation

No Chinese leadership could agree to Donald Trump’s unrealistic demands

US president Donald Trump and his Chinese counterpart Xi Jinping during Trump’s visit to Beijing in September 2017. The Trump administration’s maximal demands that China must stop technology transfer, cease manipulating its currency and balance its trade with the US arise from a zero sum view effectively requiring China to reverse its huge modernisation programme. Photograph: Nicolas Asfouri/AFP/Getty Images

US president Donald Trump and his Chinese counterpart Xi Jinping during Trump’s visit to Beijing in September 2017. The Trump administration’s maximal demands that China must stop technology transfer, cease manipulating its currency and balance its trade with the US arise from a zero sum view effectively requiring China to reverse its huge modernisation programme. Photograph: Nicolas Asfouri/AFP/Getty Images

 

The rapid development and potential escalation of a trade war between the United States and China goes beyond economic issues to raise profound questions about the future of the world’s most important bilateral relationship.

Whether China can develop its vast potential peacefully and cooperatively with the US will set the terms of this century’s international politics. The Trump administration’s maximal demands that China must stop technology transfer, cease manipulating its currency and balance its trade with the US arise from a zero sum view effectively requiring China to reverse its huge modernisation programme. No Chinese leadership could agree to such unrealistic demands.

Chinese president Xi Jinping: visited Ireland as provincial party secretary of Zhejiang province in 2003. Will Hu Chunhua’s visit to Ireland similarly bode well for his political future? Photograph: Fred Dufour/AFP/Getty Images
Chinese president Xi Jinping: "No Chinese leadership could agree to such unrealistic demands" as Trump administration is imposing. File photograph: Fred Dufour/AFP/Getty Images
A ban on investment both ways would undermine the commercial models of many US companies which have outsourced production to China

Last week the US added a further 25 per cent increase of tariffs on Chinese goods, bringing those affected in trade both ways to some $100 billion since July. The logic of escalation and retaliation could see that extend rapidly to most of the trade between the two states, up to 10 times that amount. If events go in that direction both economies would be badly hit.

A ban on investment both ways would undermine the commercial models of many US companies which have outsourced production to China, while Chinese investment in US companies now amounts to one of its largest sources of international finance.

The deep interdependence between them created by China’s development is illustrated by figures showing its GDP, amounting to 20 per cent of the US economy in 2000, is estimated to have reached 66 per cent in 2017. By 2030 China may overtake the size of the US economy.

To say that is not to agree that they will be of similar strength, since US income per capita is six times China’s and its innovatory capacity remains world beating. Trump’s effort to protect those features by opening up conflict with China is misconceived as well as unrealistic. Economic, technological and financial flows are far more open than before, creating the international infrastructure that underpins relations between the two economies.

China is now strong enough to seek allies against such an escalation, but in doing that it must make concessions itself

China’s development programme foresees it playing a leading role in high technology by 2025. That has led to an aggressive search for global investments and acquisitions and protectionist ways to ensure it benefits from international investments. Its chosen path is understandably competitive and often treats partners unfairly. Other world powers and blocs like the European Union make this case without resorting to the Trump administration’s demands.

China is now strong enough to seek allies against such an escalation, but in doing that it must make concessions itself on open access to its markets, and a more shared approach to its economic development. Such cooperation could head off Trump’s unilateralism but will require more initiative and leadership from all those affected than has been apparent so far.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.