Late Friday China backed out of pending trade talks with the United States that had been scheduled for next weeks, which further dimmed hopes that the two countries could resolve what President Trump has characterized as long-standing trade issues he sees as unfair to Americans.
The Wall Street Journal reported that the decision by Beijing to back out of talks is “the latest escalation in trade tensions.”
The decision comes after Trump imposed an additional $200 billion in tariffs on Chinese imports, which led Beijing to retaliate by imposing tariffs on $60 billion of U.S. goods. That prompted the president to vow placing new tariffs on an additional $257 billion worth of Chinese products, the WSJ reported.
According to the paper’s sources, Chinese government officials have said Beijing won’t bow to U.S. pressure tactics. By pulling out of the talks, the sources noted, China was merely following up on an earlier pledge to never negotiate while under threat.
“Nothing the U.S. has done has given any impression of sincerity and goodwill,” Chinese Foreign Ministry spokesman Geng Shuang said at a news briefing Friday, the WSJ reported. “We hope that the U.S. side will take measures to correct its mistakes.”
“The latest exchange of tariffs, which take effect this coming Monday, brings China and the U.S. closer to a full-blown trade war,” the paper noted.
Analysis: While the Chinese make good on a pledge to refuse negotiations while under threat, President Trump is making good on his campaign pledge to improve trade conditions for the United States with countries he believes have long taken advantage of the American market, the largest in the world.
It’s hard to fault the president. China’s trade imbalances with the U.S. have been massive — in the hundreds of billions — for years. Now, much of that is due to the fact that U.S. manufacturing capacity had fallen off over the past few decades (not altogether caused by, but accelerated after, the passage of NAFTA in the early 1990s). But also the imbalance is also due, in large part, to China’s epic protectionism; that is, government policies that aim to promote Chinese industries and products over imports.
But there is more to the Trump tariffs — taxes on imports — than meets the eye. First and foremost, China is the world’s biggest thief when it comes to stealing intellectual property, and the U.S. tech industry is Beijing’s No. 1 target. Theft of intellectual property is nearly incalculable if you were to attempt to put a dollar amount on it; there is no way to assess the value of an ‘idea’ or concept before it is realized. Suffice to say, however, that technological property in sum is today what the Industrial Revolution was to the U.S. and the West in the 18th and 19th centuries.
Still, the escalating trade war reminds some analysts of a previous period in our history: The 1930s. Ray Dalio, Co-Chief Investment Officer & Co-Chairman of Bridgewater Associates, L.P., wrote last week that the U.S. and China are on a path similar to that between the U.S. and Japan in the decade before World War II.
Beginning with the Smoot-Hawley Tariff in 1930, an escalating trade war began with revisionist Japan which, along with a rising Germany, was competing for resources and economic advantage throughout Asia. As the 1930s progressed and the U.S. was mired in the Great Depression, Japan would eventually invade China for resources (and to ameliorate the economic status of its own people), while Germany increasingly squeezed — and absorbed — European nations on its way to continental dominance.
By the end of the decade, U.S. economic sanctions against Japan culminated in outright embargoes of steel, iron, and other natural resources Japan did not possess.
The rest is history.
China and the U.S. may not soon be exchanging cruise missiles, but historically escalating trade and economic sanctions between the established, dominant power (the U.S.) and the revisionist power (China) have led to conflict. Clearly the Chinese are on the rise, now having the second-largest economy in the world. There is no going back for Beijing, either, and seems likely that President Trump and his economic/national security advisers are equally aware of this. That would especially include Defense Secretary James Mattis, who is a warrior-scholar and well-versed in the history of revisionist powers and historic examples of Thucydides’s Trap.
For the U.S., however, backing down isn’t an option, either.