The results of the US-China trade war: who lost and who won

KOLTASHOV Vasily

Against the background of amazement at the level of inflation in the United States and the search for its political perpetrators in each other, another issue is extremely acute across the ocean (and not only) – these are the results of the trade war with China. Recent studies show that Washington’s strategy against Beijing has had positive consequences for the global economy, but the US and China themselves have lost mutually. The key conclusion of experts is that international trade in goods affected by this war has increased by 3%. However, does China really look like a loser?

Observers are lying when they write that four years of the trade war have passed, and when they claim that “this conflict did not put an end to globalization at all, but, perhaps, laid the foundation for an even more reliable world trading system.” Firstly, the calculation of the duration of the trade war should still begin at the very least from 2016. It was not Donald Trump who started it, but Barack Obama. It was he who introduced “anti-dumping duties” against Chinese steel products in the first quarter of that year – 265.79%. It was not just a protective measure, but the duty of duties – a huge barrier. It was a response to the rapid progress of Chinese metallurgy.

It is worth noting that in 2016 the United States introduced duties against steel from other countries. For the Brazilian firms CSN, Usiminas and others, it was 38.93%, for the Japanese JFE and NSSMC – 71.35%, for the Indian Tata – 31.39%; as if they took pity on the British company Caparo – 5.79% and the South Korean business, for which the duty rose to 6.9%. Similar measures against foreign competitors were introduced by the United States in the 19th century. However, there were no such duties as for Chinese steel. This is a real trade war, based on the infernal determination of the States, but also their diabolical vulnerability.

Goodbye Chimerica

The size of the US protective duties of hundreds of percent testified to the weakness not of the most innovative industry – ferrous metallurgy, but of the situation as a whole. Obama proved that his economic policies were successful. Trump called it a failure. In October 2016, the latter said on television: “China, when its GDP growth fell by 7%, is a national disaster. We have growth of 1%. This is almost no growth. And we will fall lower – this is my opinion.” Americans saw an abundance of Chinese goods and a scarcity of good jobs and voted for change in the opposite direction. So Trump came to power on a wave of protectionist sentiment in the United States, which even embraced adherents of “free competition” and “uncontrolled market” among the Republicans.

No reboot.

Step by step, the Trump administration launched an offensive against China. On May 10, 2019, it raised tariffs on imported goods from China from 10% to 25% – the measure covered annual imports of $200 billion. “, – said US Trade Representative Robert Lighthizer.

Chimerica came to an end (as the professors called the alleged unbreakable trade and (later) socio-political connection between the United States and China). China responded to the threat of US measures by publishing a list of 106 items subject to restrictions: aircraft, cars, agricultural products, chemicals, and so on. The duty on them was set at 25% and affected $ 50 billion in exports from the United States. A stream of harsh statements and a negotiation process followed, which gave the United States confidence that China would buy soybeans, grain and many other goods from the States. Trade did not stop, but trust and hope were killed.

US Achilles’ Heel and China’s Strength

Donald Trump tried to present himself as a radical reformer of US economic policy. However, the main model has not changed. China has become even more convinced that it is necessary to develop microelectronics, industrial engineering and preserve firms that violate American intellectual property rights – China has gone beyond the “niche” assigned to it. Ideally, its industry should have worked like this: a Western company places an order for products priced at $ 1 per unit, allowing the Chinese business to earn 10% – 10 cents on the dollar; then a Western firm sells these products under its own brand at three to four (sometimes 10–20) times more expensive. But Chinese firms have learned to sell precisely such products themselves and have created advanced production facilities in mechanical engineering.

In China, they not only found loopholes that led to its transformation from a largely peripheral economy for the West into a powerful and leading economy, but also understood the vulnerability of the United States – the limit of American protectionist aggressiveness. Since the 1980s, the US has been building a “new economy” less industrialized and more based on intellectual property. Its basis was: patents, all kinds of information, brands. All this allowed the United States to own technology, marketing rights and further developments. This was supposed to create an insurmountable advantage for the United States over other economies, and above all over China. In 2013, American intellectual property was valued at $5 trillion. I think that by 2022 this amount could not help but increase by at least $2 trillion (no official data has been provided to date).

Take the US trade war against China to the limit, and Beijing could liberate American intellectual property. This would have caused the United States an initial loss of $10 trillion, according to conservative estimates. This includes the fall in the stock market and the loss of creditors. Washington cannot help but realize that securing information ownership for US business in a multipolar world is extremely difficult, and may be increasingly less possible. Refusing cheap Chinese goods even in response to such a powerful blow (whatever caused it – a trade war or a war over Taiwan, for example) is unrealistic, since this will hit the mass consumer, who is not ready for this. There is nothing to replace goods. This is the true strength of China.

The results of the trade war

No matter how harsh the statements in Washington and Beijing sounded, the sides waged the trade war cautiously. China did not seek to sacrifice what it had achieved in the US market, and the American authorities understood their weaknesses. The trade war destroyed the myth of Chimeric, replaced by an awareness of the difference of interests. Here, China softened its attitude towards partners, especially in continental Eurasia, recognizing their right to industrial development, and not just supplying the Chinese market with raw materials. He readily began to provide them with industrial equipment. Otherwise, the US could surround China with unfriendly regimes.

The United States, in turn, tried to encourage other countries to replace Chinese goods. Here we often had to turn a blind eye to the fact that Vietnam or the Philippines could repackage Chinese products and pass them off as their own. India needed to be forgiven for producing counterfeits of Chinese goods that were themselves “copies” of Western brands. By creating a manufacturing counterbalance to the PRC, the US authorities encouraged economic development where they previously did not want to encourage it. The US itself could not replace cheaper Chinese goods, although Trump boasted of success in maintaining his production – and they were, but partial and not very stable, which cannot be interpreted as evidence of the unconditional success of a trade war, but only as confirmation of its necessity.

American researchers of the trade war between the US and China do not see the end of globalization in it, although it immediately damaged the mutual trade of countries. Thus, the trade turnover between the United States and China in 2019 reached $541.2 billion, having decreased by 14.6% compared to 2018. However, already in 2020, despite the “coronacrisis”, it grew by 8.3%, amounting to $586.72 billion. 2021 brought a new increase in trade, but Chinese imports to the United States grew faster than the supply of American goods to China. In 2021, China’s foreign trade volume first exceeded $5 trillion and then $6 trillion. Apparently, it did not work to weaken the PRC.

In the United States, globalization is understood as the growth of world trade. But it has grown since its inception in the 16th century. Another understanding of globalization is as the presence of general rules for the world economy, which were given by the “Washington Consensus”. The US didn’t send it to the landfill in 2018, the year they claim the trade war against China began; and already in the context of the second wave of the global crisis of 2014-2016, they did not help other countries, but aggravated the situation. These include: the “war of sanctions” against Russia; the deposition of President Dilma Rousseff in Brazil under US influence; a blow to the WTO (the United States blocked the budget and the appointment of judges in 2019, which accelerated the discrediting and collapse of this structure).

The anti-globalists in the 2000s argued that globalization and “free trade” depended to a large extent on the WTO. In 2014-2021, it became clear that the development of the world economy is based on trade wars and sanctions. The growth of military-political tensions now tones up governments. In my opinion, China has not lost anything in this process, not even the American market, no matter how hard the US analysts and politicians try to prove otherwise. But Washington has hardly gained much, as its importance for China is declining. It is not the US-China deal that protects Chinese exports to America, but the impossibility of refusing them.

The US is too vulnerable and China is too strong. Demand from the PRC in 2016 and 2020 revived the global economy after the collapse of the markets. This country is increasingly taking on the role of a global locomotive. This is not the case with losers. And the losers are not spurring the growth of “young markets”. However, American researchers of the trade war see the growth of world trade as its result, but do not see the success of China. Meanwhile, I see an objective analysis as follows: US protectionism did not achieve its goal, but gave separate results; the recovery of the American economy  did not happen due to monetary and other policies; China, on the other hand, was not brought to obedience or thrown back in its development – it increased its weight in world trade and is quite capable of replacing Western countries in the supply of high-tech goods, bypassing or breaking their patent system.

The US trade war against China is not over and is unlikely to end soon. If fundamental reforms do not take place in the United States, sooner or later the PRC, together with the rest of the world, will be able to record a victory on points. Then American analysts will never say that the US and China have suffered equally. Now the US is breaking the old rules of global trade or threatening to write new ones without China. But it is more likely that China, having gained a foothold in the place of the United States, that is, in the place of a global industrial leader, will find a common language with other new development leaders and the following rules will be written without the United States.

Courtesy: (TASS)