The ongoing US trade war against China will have deep longer term repercussions, independently of whether a trade deal is reached to end it. Had it only been a question of erratic actions by a lunatic president, the effects could have been limited. But Trump is not alone. The general mood in the US establishment is that China should be contained, or even rolled back. So the key-word is now ‘disentangling’ of the US economy from China.
The ongoing trade war that the US has unleashed against China will change the history of the 21st century, independently of whether an agreement is eventually reached between the parties or not. It signals the decision of the US to prevent China from growing into an economic superpower, using whatever means it has at hand. But this is an extremely dangerous and futile policy. China has more than four times the population of the US. As it develops, its economy will inevitably surpass the US. There is nothing the US can do to prevent that, so they will have to find out how best to live with it. Unfortunately, this is not how an important part of the US establishment sees it.
China is no longer a low-wage economy. To avoid being caught in a trap where its products are neither really cheap, nor really good, it wants to go upmarket, moving from low-tech standard products to high-tech, high-value products. This is what the strategy “China 2025” is about, supported by big government funding. Is this a legitimate strategy, or is it unfair competition? The US thinks the latter and is determined to do what it can to stop it. But they are unlikely to succeed.
The spectacular arrest in Canada of the chief financial officer from Chinese telecom giant Huawei follows on the heels of the US punishing another Chinese telecom company, ZTE, earlier this year. The argument is that these companies have violated the US sanctions against Iran. But this is a much deeper conflict and of existential importance for both the US and China and the consequences are far-reaching. How far is the US willing to go to prevent China from becoming a technological great power?
The US has during the last couple of years blocked Chinese technology firms from entering their market. One of the targets has been Huawei, one of the world's leaders in communication equipment. According to Michael Rogers, chairman of the House Permanent Select Committee on Intelligence, “Huawei and ZTE provide a wealth of opportunities for Chinese intelligence agencies to insert malicious hardware or software implants into critical telecommunications components and systems”. The reason, it becomes clear now, is that this is what NSA makes US companies do. This validates the old saying: Thieves believe everybody else steals.