The dangers of escalation of the US-China trade war

This year the US and China celebrate the 40th anniversary of formal diplomatic relations, but unfortunately they are marking the anniversary with a trade war. Some blame this on President Donald Trump, but tensions would be present in Washington even if Hillary Clinton had won the 2016 election. Many Americans, both Democrats and Republicans feel that China has not behaved fairly as a market economy in an open trading system, does not practice real reciprocity, and some tech companies have stolen American intellectual property.

Behind the trade dispute is a growing fear that China is trying to end the American era. The danger is that if there is no compromise on the trade issues, the erosion of trust on both sides will lead to a larger political deterioration in the US-China relationship. Some hawks would welcome this, but a new Cold War would be a lose-lose outcome.

Today, fear is growing in both countries, but as Thucydides warned long ago, exaggerated fears can themselves become a cause of conflict. It is equally dangerous to over or under estimate the balance of power. Measured in dollars, China is about two-thirds the size of the American economy. Many economists expect China to pass the US as the world’s largest economy, but the estimated date varies from 2030 to mid-century depending on what one assumes about the rates of Chinese and American growth.

The US should avoid exaggerated fears that could create a new cold or hot war. Even if China some day passes the US in total economic size, the US military expenditure is three times of China. The US will retain some long term power advantages that are likely to persist regardless of the current actions of China or the Trump Administration. Energy is a major American advantage. A decade ago, the US seemed hopelessly dependent on imported energy. Now the shale revolution has transformed North America from an energy importer to exporter at the same time that China is becoming more dependent on energy imports from the Middle East, and transport through the Indian Ocean.

Despite these advantages, too much fear could make the US fail to play its cards skillfully. It is important to see the US-China relationship as a “cooperative rivalry” rather than a new Cold War. China and the US face transnational challenges that are impossible to resolve without the cooperation of the other. Environmental globalization will increase. Climate change and rising sea levels obey the laws of physics, not politics. As borders become more porous to everything from drugs to infectious diseases to terrorism, it will be important for the largest economies to cooperate to cope with these threats. Some aspects of the relationship will involve a positive-sum game.

Unfortunately, populist nationalism is rising, and it is much easier for politicians to create fear about a new cold war which will be lose-lose. That is why both countries should avoid escalation of the current trade war.

Joseph S. Nye is a professor at Harvard’s Kennedy School of Government. His forthcoming book is Do Morals Matter? Presidents and Foreign Policy from FDR to Trump.

The opinions expressed here are those of the writer and do not necessarily represent the views of China Daily and China Daily website.