View from the Street: Made in America - Trump's trade war

@lyle_h_hill

View from the Street: Made in America - Trump's trade war

International issues have seldom been far from the headlines in recent weeks.
 
The diplomatic row between the UK and Russia looks to have moved on from diplomatic flashpoints, and shows signs of crystallising into a longer period of cooled relations between East and West. And never far away is Trump. Although his rule-by-tweet style of economic policy has dropped out of the news in favour of the recent tit-for-tat in the Mueller investigation, the president’s decision to raise tariffs on a number of Chinese goods looks to have set the stage for a trade war which could rumble on for a long time yet.
 
And the trade issue is the more interesting, as it raises important points about the nature of the relationship between the US and China that have been debated for some time. China has come to view itself as an independent superpower, building alliances in regions it believes the West has neglected, such as Africa.
 
In the past, China would often pick and choose when and where to engage with international bodies. On the one hand, it has pitched itself as a global superpower with a stake in international affairs, such as on the UN Security Council; and on the other, as a developing economic nation in terms of GDP per capita, which should allow it exemptions from certain international obligations (i.e. joining the WTO on certain terms and exempting itself from climate change policies).
 
In other areas, China has sought to challenge the existing international bodies and take a leading role in Asia. The Asian Infrastructure Investment Bank is a prime example of this, as China seeks to take a prominent role in international affairs, but only on its own terms. Under Xi Jinping, the country’s most powerful leader since Mao, the Chinese government has adopted a language of “exporting the ‘China Model’.
 
The US has rightly seen this as a threat to its dominance, not only in the Asia Pacific region but on its home turf and in developing markets around the world. But the standard response of former presidents, to lead the global order and step up to the role of standard bearer for economic liberalism, has been turned on its head by the new administration.
 
On the face of things, Trump’s protectionist policies have merely raised trade tariffs against China in response to alleged intellectual property theft. In reality, it is much more than that, given how China has been repeatedly branded a currency manipulator and is undoubtedly viewed negatively in Washington DC for its beneficial trade terms. Whereas the Chinese government’s recent moves to relax regulation for certain sectors might have given the two administrations common cause to develop global markets in mutual interest, the United States’ sharp turn inward has instead set the stage for a trade war to become ideological.
 
But then again, nothing is new under the sun, and the present suspicion – or indeed, jealousy - of Chinese business builds on a long tradition in the United States, especially based on national security concerns. It should be no surprise that intellectual property theft is the reason the Trump administration has used to impose tariffs.
 
Within telecoms, the global mobile phone provider Huawei is a prime example of this uneasy view of Chinese business. It has been repeatedly blocked from operating in the United States, and the FBI, CIA and the Committee on Foreign Investment are particularly unhappy about the use of its equipment for snooping. However, this has not stopped it becoming the world’s leading vendor, ahead of Nokia and Ericsson, without the United States. It suggests that providing good products at a reasonable price now means more than access to the world’s richest market.
 
Trump’s present tactics have a whiff of simply ‘throwing the toys out of the pram’ and are ill-advised. Perhaps the US should take heed of the warnings before pursuing a path of protectionism, and leaving China to claim an ironic mantel as the champion of openness in the international economy.