The Trump administration's trade theatrics are drawing attention from a deeper shift in US foreign and trade policy. Washington is giving up on decades of attempts to integrate China within a US-led world order. The implications, from the future of the WTO to the control of advanced technologies, will long outlast the Trump presidency.
After several months of low-level skirmishing, the phoney trade war is over and the real one has begun. Where the steel and aluminium tariffs were only a shot across the bow, US automotive tariffs could escalate to as much as $300 billion worth of tit-for-tat measures, while the opening salvo of tariffs on $34 billion of Chinese products has the potential to end up encompassing virtually the entirety of Sino-US trade after the ensuing rounds of retaliation. And this is a war that may rock the basic edifice of the global trading system. The draft 'Fair and Reciprocal Trade' (FART) bill may be more an act of acronymic trolling than a serious legislative proposal, but there is certainly an active debate in the US government about the circumstances in which the United States may withdraw outright from the World Trade Organization, whether it be a WTO ruling in favour of China's status as a 'market economy' or against the dubious US use of national security exemptions. In the immediate aftermath of the global financial crisis, there were acute concerns that 1930s-style protectionism may stage a comeback. Instead it is a United States at the peak of an economic boom that is bringing global trade to its most perilous moment in decades.
There is a temptation to conflate the measures the Trump administration is taking in trade policy with its broader assault on 'liberal' international institutions. It is certainly hard to imagine other circumstances in which such a breadth of damaging actions would have been pursued, even by another populist US president. The entire approach is suffused with Trump's peculiar views about trade deficits and his indifference--or even active enthusiasm--for the political and economic costs that he is inflicting.
Yet the trade war has two very distinct fronts to it. The first, the 'war on allies' that has seen the EU, Japan, Canada and Mexico feature among the principal targets, commands little internal support, whether in Congress or among administration officials. This element of the campaign could yet be wound up, whether by aggrieved senators from his own party, who are openly debating whether Congress should reclaim authority for trade policy from the White House, or by Trump himself, if the political heat resulting from the effects of the retaliatory tariffs grows too intense.
But the second front is likely to endure for longer, and has far deeper backing. US policy towards China is in the process of a significant rebalancing, in which the Trump administration's policies are only the surface layer of a more comprehensive shift of views among current and former officials, the China-watching community, significant swathes of US business, and an unusually bipartisan consensus among legislators. Although their concerns are diffuse, the main point of agreement is that the continued economic and political integration of China into global systems and institutions no longer serves US interests. As such, it is the repudiation of one of the central strands of the US approach to China that has persisted since the Nixon opening. This change in US strategy--and the challenges to which the United States is responding--are likely to have even more significant implications for Europe, and for the UK, than the current Trump theatrics, yet take up a comparably tiny portion of the political oxygen.
The Xi Effect
The traditional balance of US-China policy was always composed of both cooperative and competitive elements, but there was a shared view that a degree of economic openness to China should remain a part of the strategy. For some, that approach was informed by hopes that political integration and sustained economic growth would, in time, lead to the end of the Chinese Communist Party's (CPC) rule. For others, the hope was that the Chinese government would develop deepening stakes in the maintenance of the existing international order. Most saw pragmatic reasons for China to continue on a path of economic reform and opening, however punctuated. And even among those who doubted that political change was coming, that China would evolve into a defender of the global order, or that Chinese economic liberalization could reliably be expected to persist, the balance of US policymakers still believed that differences between the United States and China could at least be managed through some combination of negotiation, cooperation, and pressure, and that the US-led international system was resilient enough to deal with China's rise.