It began as a trade dispute, but it’s becoming much more: a fundamental shift between the United States and China, the single most important great-power relationship in today’s world. Even, conceivably, a new “cold war.”
We’re not there yet. One wild card – the initially warm, now decidedly cooler, relationship between President Trump and Chinese leader Xi Jinping – could yet exert a restraining effect. The two men are due to meet in a few weeks’ time at the G20 summit in Buenos Aires.
Yet with efforts to resolve the tit-for-tat tariff battle in limbo, Vice President Pence this month served public notice that the US sees trade as just one grievance among many against China’s economic, military, geopolitical, and human rights policies. And he explicitly questioned a core assumption of US policy over the past two decades: that support for modernization in China and its integration into the world economy would temper Chinese leaders politically and provide the basis for a relationship of cooperation. Mr. Pence said, in effect, that ship had now sailed.
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A new cold war, if that’s what it becomes, will likely look far different from the first. The Soviet Union was an underdeveloped country with an outsized military and a fearsome nuclear arsenal. China is also a nuclear power, and has been gradually building up its military reach in recent years. Yet with China, the root source of competition and of steadily growing friction has been an economic one. More specifically, it’s about how China has been using its growing economic might.
China’s economy is the world’s second largest after the United States. Its population of nearly 1.5 billion, along with its manufacturing and technology capacity, has given US and other foreign companies less costly production options, meaning cheaper prices for consumers at home as well as potential access to China’s huge market. But as an entry price for US technology companies in particular, China has required access to their cutting-edge commercial innovations, which in turn have powered a drive to develop their own high-tech.
There is also Belt and Road, the $1 trillion investment and infrastructure campaign through which China has undertaken to recreate the old trading route with the West. Beyond expanding its geopolitical footprint, this has had security implications, especially in cases where the recipient countries have ended up with unsustainable debt: access to naval facilities, for instance, in Sri Lanka and East Africa. US concern has been compounded by more direct military and intelligence activities, like China’s buildup in the South China Sea and electronic espionage and hacking against US commercial and strategic targets.
The challenge has been how to respond. The complexity has been highlighted by Mr. Trump’s initial focus on trade, and his imposition of steep new tariffs. With China having imposed counter-tariffs, both countries’ economies have been impacted. China has additional leverage as well, including a potentially key role in whether Trump succeeds in getting a denuclearization deal with North Korea.
Pence’s speech left the door ajar to de-escalation, saying Chinese leaders could still “change course” and agree to a “fair” economic relationship. It’s possible that, with the Trump-Xi meeting next month, one intention was to jolt China into giving ground on at least some of the trade grievances.
But there are already signs of a substantive US recalibration of China policy. While the Trump administration had previously downplayed human-rights issues, Pence directly called out the Chinese for their policy on Tibet and their crackdown on Muslims, Christians, and other religious communities. In another departure, from earlier plans to slash foreign aid, the president this month signed a bill revamping a body to provide loan guarantees to US companies investing in developing countries. It was a reply – though at $60 billion, on a much smaller scale – to China’s Belt and Road.
One question now is whether a new approach might include a reopening to allies, who share US concerns over China’s policies. Among Trump’s first acts on taking office was to withdraw from the Obama-era Trans-Pacific Partnership, which was set up to provide a counterweight to China’s trade policies and expanding economic power.
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