{"id":19131,"date":"2018-12-01T03:38:45","date_gmt":"2018-11-30T19:38:45","guid":{"rendered":"https:\/\/chinaworker.info\/?p=19131"},"modified":"2018-12-01T03:38:45","modified_gmt":"2018-11-30T19:38:45","slug":"us-china-trade-war-can-xi-and-trump-back-away-from-conflict","status":"publish","type":"post","link":"https:\/\/chinaworker.info\/en\/2018\/12\/01\/19131\/","title":{"rendered":"US-China trade war \u2013 can Xi and Trump back away from conflict?"},"content":{"rendered":"

Hopes for a \u201cmiracle in Argentina\u201d but great power tensions are rising<\/strong><\/p>\n

Dikang, chinaworker.info<\/p>\n

All eyes are on the G20 meeting in Buenos Aires at the end of November. On the sidelines of the summit, China\u2019s Xi Jinping will meet his US counterpart Donald Trump for the first time since the world\u2019s two economic giants became embroiled in a trade war five months ago.<\/p>\n

Could the meeting of the two leaders bring the conflict to an end? While many capitalist commentators are hoping for a \u201cmiracle in Argentina\u201d the most recent signals, and the fundamental positional divide between the two sides, suggest this is unlikely. It seems that, at best, a truce could be declared at the G20 whereby Trump\u2019s threats of new tariffs \u2013 to encompass all Chinese imports to America, from the 50 percent affected today \u2013 are put on hold to allow more talks, while existing tariffs from both sides would remain in place. Even this \u2018best case scenario\u2019 is perhaps not the most likely outcome.<\/p>\n

\"\"<\/p>\n

New cold war<\/strong><\/p>\n

The conflict between the two superpowers, described as a \u2018cold war\u2019 by many commentators, has become the defining story of 2018.\u00a0It has increasingly moved beyond trade to encompass a broad range of issues \u2013 investments, technology, allegations of economic espionage, China\u2019s military policies and its global infrastructure plan, the Belt and Road Initiative. This represents a historical turning point as summarised by The Economist magazine: \u201cThe era of engagement is over. The world\u2019s two superpowers have become rivals.\u201d<\/p>\n

The economic fallout from Trump\u2019s imposition of tariffs in July, on an initial US$50bn of Chinese imports, which was extended to a further US$200bn worth in September, has so far been limited.\u00a0But this could change dramatically if the trade war continues and escalates in 2019.<\/p>\n

Under this scenario, the US economy, which has suffered only marginal effects so far, could suffer a lot more from higher prices for Chinese products, driving up consumer inflation thus prompting the central bank (Federal Reserve) to increase interest rates more rapidly. Trump is already unhappy that the Fed is raining on his parade, blaming the central bank for puncturing the unprecedented US stock market bubble. \u201cThe Fed is going wild. They\u2019re raising interest rates, and it\u2019s ridiculous,\u201d he said in October.<\/p>\n

Wall Street has been rocked in recent months, with US stocks entering \u2018correction\u2019 territory twice since the start of October. A stock market correction is defined as a fall of 10 percent from the most recent high. This is ironic because Trump\u2019s representatives have often pointed to China\u2019s stock market, the world\u2019s worst performer in 2018, as proof the US president\u2019s aggressive trade agenda is \u201cworking\u201d and will force the Chinese government to meet his demands.<\/p>\n

The pressure is mounting on both sides to avert an escalation of the conflict, but this does not automatically mean they can reach a deal. In late October, Trump\u2019s tweet that negotiations between the two sides were \u201cmoving along nicely\u201d triggered a surge on global stock markets. There seems to be little substance to this claim, however, and many commentators dismissed Trump\u2019s comments as a political move in the final days of the Congressional election campaign.<\/p>\n

Dark cloud over global capitalism<\/strong><\/p>\n

Various global forecasters are predicting that if the US-China trade war rumbles on into next year its impact on the global economy will be more significant. A recent OECD report warns this could knock 0.8 percent from global growth by 2021. This would represent a sizeable slice out of the 3.5 percent growth the OECD forecasts for 2019 and 2020. Financial turbulence, of which we\u2019ve already had a foretaste, could be even greater than the impact on GDP. Theoretically, this could even trigger a new worldwide recession if heavy financial losses, from the gigantic casinos that dominate modern capitalist economies, spillover into the real economy.<\/p>\n

But even with the economies of both China and the US feeling more pain as the conflict drags on, the trade disputes are dwarfed by political and strategic interests that have escalated dramatically since the summer. These were on full display at the recent APEC summit in Papua New Guinea (17-18 November) the first ever to end with no agreement on a final communique. China, with Xi in attendance, refused to sign the document into which the US had inserted criticism of \u201cunfair trade practises\u201d \u2013 a veiled attack on China.<\/p>\n

The extent of the rivalries between the Chinese and US regimes was shown by the speech of Mike Pence, Trump\u2019s vice president, at the APEC meeting. He launched a tirade not only against China\u2019s alleged trade abuses but against Xi\u2019s flagship BRI project: \u201cWe do not offer a constricting belt or a one-way road\u2026 We don\u2019t drown our partners in a sea of debt. We don\u2019t coerce or compromise your independence.\u201d<\/p>\n

Pence told the assembled countries, \u201cDo not accept foreign debt that could compromise your sovereignty. Protect your interest. Preserve your independence. And just like America, always put your country first.\u201d<\/p>\n

It\u2019s preposterous of Pence to claim the US has never violated other countries\u2019 independence, used coercion, or used debt as a weapon to secure its economic domination. Dozens of countries from Mexico to South Korea have a vastly different experience. But this new belligerent tone shows that Trump\u2019s administration wants to whip up and exploit opposition on the ground in BRI countries especially in Asia, against Chinese financial control and Beijing\u2019s deals with corrupt local elites. US capitalism, allying with Japan, Australia and India in this endeavour, hopes to extract economic and geopolitical advantages by pushing back against China\u2019s cheque book diplomacy in the region.<\/p>\n

Pence further angered the Chinese delegation by meeting with Taiwan\u2019s representative, Morris Chang (Taiwan participates in APEC as an \u201ceconomic\u201d but not as a \u201cpolitical\u201d entity). Pence announced he would \u201ccarry back\u201d a Taiwanese proposal for a free trade agreement with the US. This is nothing but a continuation of the shift in US strategy since Trump came to power, to use Taiwan as an ultimately \u2018expendable\u2019 chess piece to increase pressure on the Chinese regime.<\/p>\n

\u201c<\/strong>M<\/strong>ock deal\u201d<\/strong><\/p>\n

While a \u201cmock deal\u201d may be reached in Argentina, as Bo Zhuang of TS Lombard surmised, \u201cWe don\u2019t think this deal will be engineering a long-term truce between the two countries\u201d.<\/p>\n

It doesn\u2019t appear likely that the Chinese side can significantly increase the trade concessions it already offered in May when it believed it had reached a deal with the US to avoid tariffs. To do so could pose a threat to Xi Jinping\u2019s personal authority, with implications for his rule going forward.<\/p>\n

In the months that have passed since the trade conflict began, the Chinese regime has been assessing alternative strategies that include an even greater emphasis on \u201cself reliance\u201d and massive state-backed investments to develop its own technology industries and in this way offset US moves to block its access to their advanced technologies.<\/p>\n

The Trump administration\u2019s insistence that China implement \u201cstructural changes\u201d, meaning the abandonment of state capitalist measures, is non-negotiable as far as Xi is concerned. The current economic model is what keeps the Chinese dictatorship in power. All that it can offer are some additional superficial reforms and market opening measures to pacify (i.e. bribe) sections of foreign capitalism.<\/p>\n

The conflict could also escalate in a number of ways, possibly with Beijing abandoning its current defence of the yuan and allowing a more significant devaluation. The government-owned China Daily has hinted as much, and there are indications the yuan would have already pierced the psychologically important level of 7 to the US dollar, but for the meeting between Xi and Trump in Argentina.<\/p>\n

The US would be expected to retaliate in this case by branding China a \u201ccurrency manipulator\u201d. But in this case most of its trade weapons have already been deployed. \u201cEverything has already happened\u201d said Zhuang of TS Lombard. \u201cTrade war was the worse case scenario even before being labelled a currency manipulator,\u201d he said.<\/p>\n

This conflict underlines the instability and unviability of global capitalism, which entered into unprecedented crisis with the US financial meltdown of ten years ago. The workers\u2019 movement is the only force, based on the ideas of internationalism, solidarity and socialism, that can lead mass struggles to end the chaos of capitalism.<\/p>\n","protected":false},"excerpt":{"rendered":"

Hopes for a \u201cmiracle in Argentina\u201d but great power tensions are rising<\/p>\n","protected":false},"author":44,"featured_media":19132,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"tdm_status":"","tdm_grid_status":"","footnotes":""},"categories":[132,148,124],"tags":[],"class_list":{"0":"post-19131","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-china","8":"category-international","9":"category-news"},"yoast_head":"\nUS-China trade war \u2013 can Xi and Trump back away from conflict? - China Worker<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/chinaworker.info\/en\/2018\/12\/01\/19131\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"US-China trade war \u2013 can Xi and Trump back away from conflict? 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