Commentary:
Watching the U.S. and China’s interaction of late reminds me of two heavyweight prize fighters circling each other in the ring and throwing exploratory jabs to seek out the other’s weaknesses. Each fighter has an arsenal of brutal punching power, upper cuts, and combinations that would knock any other fighters out. Yet these two brawlers are bobbing their heads and tapping at each other without yet totally emptying their arsenal.
It is obvious to me that the overriding factor in the current U.S.-China trade war is the pride that exists on both sides. On the U.S. side is Donald Trump, who is constantly complaining that the U.S. has not been properly respected in the world and “doesn’t win anything, anymore.” He believes that the U.S. can go it alone without having to engage the rest of the world in its economic or diplomatic approaches. In Trump’s camp, it is “America First,” at all costs.
However, this U.S. approach severely overlooks the huge role that pride also plays in China’s international strategy and relations. China reminds me of Germany in the 1800s. Otto Von Bismarck successfully unified the different German kingdoms and provinces in 1871 and formed the modern German Empire. By this time, other European powers, such as England, France, and Spain, had for centuries earlier colonized much of the world and had become rich off of their spoils. Germany was late to the game in terms of claiming territories or being considered at the same level as its western neighbors.
Germany rapidly became a world economic power through the industrialization of its economy. German goods at this time were being purchased throughout the world. Its Ruhr Valley became one of the largest mining and industrialized regions in the world. However, German leaders did not feel that Germany was being provided the respect that it deserved in Europe or throughout the world for the oversize role that it was playing. As the saying of that time said, “Germany deserves its place in the sun.” This pride and chip on its shoulder eventually led Germany into wars culminating in WWI and WWII.
For centuries, western traders had sought to open up China’s economy to trade. This led to the Opium Wars of 1839 to 1842, in which British traders forced the export of opium from its colony in India to China for the benefit of British opium traders. China fought back, but superior British firepower defeated China and opened up this country to trade with the West. Western powers then extracted whatever benefits from the country that they desired, while treating the Chinese people like serfs. It was a humiliating part of history for China that still resonates in the way it deals with western powers, as it claims the West is deliberately trying to thwart its progress.
Chinese leader Xi Jinping has a great sense of China’s history with the West, and like Donald Trump he has a huge ego. China describes Trump’s tariffs as bullying, which definitely summons up a sense of history. Combine all of these factors at this point in history and the result is a U.S.-China trade war, in which the U.S. is imposing a 145 percent tariff on most Chinese imports, and China imposing a 125 percent tariff on most U.S. imports. Both countries stand to lose by this race to the bottom, and each wants the other side to show weakness by picking up the phone and pleading to negotiate.
However, the U.S. must understand the Chinese pride issue and how it feels that western powers have disrespected and abused it for centuries. We must also understand that along with pride, the Chinese also act rationally when it suits their needs. This was displayed when after the Chinese government placed the new tariffs on U.S. imports, it removed or reduced tariffs on some U.S. products like microchips, components for jet engines, and pharmaceutical products that it desperately needs.
The U.S. also must understand that China plays the long-term game. The Chinese view their culture and society as having been around for thousands of years, compared to the 249 years that the U.S. as a country has been in existence. They also know that Trump’s time in office is limited, and he will be gone in about three-and-a-half years. On the other side, Trump has stated publicly that China exports significantly more to the U.S. than it imports from our country and needs to negotiate more than the U.S.
China’s position is that this battle makes no sense, and that giving in would only invite future blackmail from Trump. U.S. tariffs hurt Chinese exporters, but Beijing is also focused on winning a symbolic battle and expanding its trade relationships with other countries around the world. So, for now, the standoff continues, while losses pile up for companies that depend on trade.
Going forward, to what extent will each leader use the heavy-handed tools at their disposal to retaliate? The U.S. can choose to inflict self-pain to try to force China into a recession and concessions. However, China will be a formidable opponent, as it holds foreign exchange reserves totaling $3.24 trillion, by which it can manipulate its and other nation’s currency values. Just as disconcerting is that it holds U.S. securities of approximately $784.3 billion that it can use to disrupt the U.S. economy. Let’s see what punches the heavyweights will throw next, or is it time to start pulling punches?
Jerry Pacheco is president of the Border Industrial Association. Jerry Pacheco's opinions are his own and do not necessarily reflect the views of KRWG Public Media.