The State Council of China issued on 2 June a white paper entitled, “China's Position on the China-US Economic and Trade Consultations.” The white paper criticizes the US for three instances of backtracking in the negotiations and for being insatiable on various issues. The Chinese government vows never to compromise on major principles concerning China's core interests and identifies three conditions for a trade deal, namely: the US removing all additional tariffs imposed on Chinese exports; the US having realistic expectations for Chinese purchases of US goods; and the text of the agreement achieving a proper balance and serving the common interests of both sides. The following day, the Office of the US Trade Representative and the Treasury Department issued a joint statement reiterating the US pursuit of an effective implementation mechanism to guard against the possibility that China might not honor its commitments.
The public exchange of blame upon a setback in trade negotiations and the burgeoning trade war again highlighted the disappearance of the old mutual trust between the two sides. Showing great confidence in its perceived stronger position, the Trump administration has applied a high-profile 'maximum pressure' strategy. China, on the other hand, has increasingly realized that the US goal in the negotiation process is to contain China's development space and suppress its rise instead of resolving trade issues. From ancient history to today, Chinese thought has long placed emphasis on statehood: the notion of “being neither a slave nor a vassal” is deeply rooted in Chinese philosophy. Although China is famed for its high level of forbearance and self-restraint, it is impossible to make further concessions when the unreasonable American demands touch profoundly upon Chinese sovereignty and right to future development.
The US plan to contain China was already partially deployed during the Obama administration: the current administration's tough policy reflects a bipartisan consensus. At a seminar at the end of April, Kiron Skinner, State Department Director of Policy Planning, talked about the “clash of civilizations” and ideology between China and the Western world, and China's vast long-term threat to the US. According to her, China-US competition is not restricted to their national interests but exists in wider areas and at a level even greater than that between the US and former Soviet Union, which was to a certain extent a fight “within the Western family.” Now it is “the first time we will have a great-power competitor that is not Caucasian.” Skinner heads an important research unit within the State Department and her predecessors include renowned Cold War theorists George Kennan and Paul Nitze. Her description of competition with China as “a fight with a really different civilization and a different ideology” is certainly not her personal opinion. Instead she was informally announcing to the outside world the Trump administration's theoretical argument behind its new China policy.
US Vice President Mike Pence, Secretary of State Mike Pompeo, National Security Advisor John Bolton and other senior political figures have also recently delivered speeches with strongly worded attacks on China. These are all signs that a broad offensive against China has just begun to unfold. The possibility of reopening negotiations and reaching a truce anytime soon is extremely slim.
The US is both the world's largest market and its center of financial operations. China, meanwhile, is the world's largest manufacturing base and the source of fat profits for American and other Western enterprises. Both countries hold immense weight in the world's overall economic structure. Their economies are deeply integrated, with complex value chain systems that are critically important to themselves and the global economy at large. With the US waging a trade war on China and imposing additional tariffs on Chinese commodities, the “rule-based” international political and economic order is headed towards disintegration.
President Trump's claim that China will pay a high price for additional US tariffs is quite unfounded. As a matter of fact, given the huge size of the two economies, the impact of tariffs alone is limited. But on the other hand, if a trade and technology war becomes protracted without a decisive result, the age of globalization and economic integration between the East and the West will end, in which case the current China-US conflict will surely but gradually spread and escalate into all-out confrontation across economic, political, diplomatic, military, cultural and other fields. No one knows now what consequences will follow but they will undoubtedly be huge and hard to estimate for both economies. It is near-certain that volatile speculation will strike international financial markets, brewing serious storms over debt and productivity, and ultimately leading to an unprecedented global economic crisis.
The latest developments in the China-US trade war suggest that basic Marxist concepts such as imperialism, monopoly capital, and contradiction between the global economy and the nation-state system have not become outdated. On the contrary, these analytic tools are needed more than ever to explain the root causes of the economic breakup between China and the US and prepare for an upcoming world economic crisis.
