Sino-US Trade War in the eyes of China: ‘we would fight to the end’

The ‘trade war’ between China and the United States appears to be the first confrontation between two figures, both of whom are determined to challenge global values and norms prevailing after the Cold War. Chinese President Xi Jinping, who has just lifted the term limit of his power and lead the state to an authoritarian direction, is encountered by US President Donald J. Trump, whose novel ideas need no more description. The confrontation can also be seen from a conventional lens, which is ‘the clash of great power’ phrased by John Mersheimer. A rising China is doomed to challenge the international order and the hegemonic power, and therefore a fightback is logical. Instead of making a fair argument based on economic indicators, this article discusses some reasons that back up Chinese confidence of its victory and provides how China conceives of this ‘war’.

On March 1st, president Trump declared that stiff tariff would be imposed on imports of steel and aluminum, and he increases his stakes by releasing a list of products which he plans to hit with tariff on April 3rd. Chinese government responded to this provocation with first cautious criticism, then protest and finally warnings such as ‘China would fight to the end’. What China has done is more than political rhetoric. On April 4th, a day after the list released by the States, China quickly responded by declaring that it will impose 25% tariff (exactly the same percentage proposed by the States) on $50 billion worth of American cars, soybean, chemicals and other goods. China’s rapid and firm position seems to surprise but also worry actors in the international society, especially the European Union and Japan. However, the ‘trade war’ is undeniable at this stage, and solutions and impacts of this great-power confrontation are still unclear.

China has taken this ‘trade war’ very seriously, and the mobilization of the upcoming difficulties is on its way. Instead of elaborating the economic and political background of the confrontation, the Chinese propaganda machine adopts a short-cut as usual, that is its nationalist discourses. A popular editorial of The Global Times argues that ‘we should fight the trade war with our resistance in the Korean War’. The logic is that if a weak China can defeat the imperial States in the Korean War, a powerful China can surely win this one. A report titled as ’the world has suffer America for a long time (天下苦美久矣)’ posits China’s fightback reflects its international responsibility, that is to challenge an America-dominated international order. The ‘trade war’ is often characterised by the idea that America ’lifts a rock only to drop it on its own feet (搬石头砸自己的脚)’ and China urges it to ‘sober back on the brink of danger (悬崖勒马)’. The most serious official response was made on April 6th by the national news agency, Xinhua Agency. It used a phrase rooted in Chinese history which means that ‘do not blame us for not having forewarned you (勿谓言之不预也)’. What is special about this seeming political rhetoric is that the phrase has only been used three times in the history of PR China, and all three contexts are war; the Vietnam War, Sino-Indian War and Sino-Soviet Border Conflict in 1969. Not necessarily indicating war, the use of phrase tells us that Chinese attitudes and determination are unusual this time.

However, it would be too simplistic to portray China as a nationalist player driven by irrational impulses in this game. The Chinese government has been prepared for confrontations as such for a long time, which could be reflected in its surprisingly sharp response. It is important to understand that the mean the States adopts to start this ‘trade war’ is ‘the section 301 of US Trade Law’. The section 301 has been used against Japan and the European Community, and the one in 1989 directly fueled the Japanese asset price bubble from 1986 to 1991, causing decade-long stagflation to Japanese economics. China has been on the priority watch list since 1990, and has dealt with five investigations, from 1991 to 2010, under the Section 301. All the investigations ended up with negotiations and compromises mainly made by China.

Facing the sixth investigation under the Section 301, the Chinese government is experienced, and preparations are on the way in advance as the possibility of the ‘trade war’ dramatically increase under Trump administrative. Further, the possibility again increased when Robert Lighthizer, who planed the fatal investigation to Japan in 1989, was appointed as the US Trade Representative in 2017. Learning lessons from Japan, Xi’s administration has implemented a series of policy efficiently through its authoritative regime. Three of them are key stabilizing factors in the China’s preparation: set the celling of housing price in major cities, regulating illegal foreign exchange and combating shadow banking. In terms of agriculture, a policy of state compensation on soybean producers was issued the day before Trump decided to hit China with stiff tariff.

China is also confident in its means to strike the American economy. Focusing primarily on soybean, automobile and chemicals, China’s list of American goods is tackling the core of the States and Trump’s vote bank. Eight out of ten states ranked top in soybean production were firm supporters of Trump, and negative impacts they may receive in this ‘trade war’ are likely to be transformed into their positions in the upcoming mid-term election. In terms of automobile trade, China’s rising tariffs can put the American automobile industry in a passive position in its competition with Japan and German. As for chemicals, China has diversified its sources of chemicals and oil, and the current global buyer market of chemicals would not provide the States much business.

Surely, ideological confrontation is always an important aspect in Sino-US confrontation, and there is no exception for the ‘trade war’. In the latest speech made by Xi in the Boao Forum for Asia, he defined China as ‘the advocate of free trade’ and hinted that the ongoing ‘trade ‘war’ is a confrontation between China which upholds liberal trade and the United States which supports protectionism. Facing growing trade deficit between two states, Chinese officials comment that the U.S. is attempting to reverse the deficit is against economic laws. In line with the image of a rising China, China finds it unacceptable to see the States reshaping the international order with its hegemonic power. Further, China is worried that a moderate position as it had in the past may weaken its international status, allowing similar tools used upon itself again in the future.

There are some other opinions arguing that the ‘trade war’ is in favor of China, but it is worth mentioning that advantages here refer to relatively low damages. There is no winner in the ‘trade war’, but it can be easy for both sides to sleepwalk into catastrophe, for example, when brinkmanship is adopted. At this stage, how the ‘war’ is going to be concluded is still unclear.