Sunday, February 12, 2017

Is a U.S.-China Trade War Inevitable?

today. Never has the value of the bilateral trade and investment relationship been greater. Never has the precarious state of the global economy required comity between the United States and China more than it does now. Yet, with Donald J. Trump ascending to power on a platform of nationalism and protectionism, never have the stars been so perfectly aligned for the relationship to descend into a devastating trade war.

Bilateral trade frictions are nothing new. Over the years they ebbed and flowed, but the tensions were managed well enough to avoid any major meltdowns. For the past eight years, the U.S.-China relationship has been under increasing duress, taxing patience and requiring great restraint from Washington and Beijing. Both governments imposed trade restrictions, but they did so in manners plausibly consistent with the prevailing rules of international trade.

The election of the impetuous Trump, who sees trade as a zero-sum competition between countries that either win or lose, renders restraint temperamentally improbable and strategically illogical. Because the United States runs a large bilateral trade deficit with China, President Trump views Beijing as the more dependent party in the relationship with more to lose from a trade war. Perceiving the consequences of a trade war as relatively benign for the United States makes that course of action a realistic option for Trump. This thinking amounts to a major departure from over 80 years of U.S. trade policy orthodoxy.

No comments: