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On US-China Trade Deal

Image Credits: Reuters
On US-China Trade Deal

In January 2020, President Trump signed phase-I of the trade deal with China’s Vice Premier Liu He. Some people and officials are hoping that this trade deal is a great achievement in the context of ongoing trade war between the two great powers. This phase-I of trade deal addresses two major issues – reduction in tariffs proportion and a little consideration of intellectual property. By this deal, the United States reduced 7.5% tariffs on various Chinese goods worth $120 billion that have been imposed since September 2019. Furthermore, American tariffs of 25% on $250 billion will remain unchanged. According to the US Treasury Secretary Steven Mnuchin, these tariffs can be rolled back after phase-II of the trade deal. Additionally, other scheduled tariffs from American side having worth of $160 billion are suspended. China also suspended its retaliatory tariffs of 25% on the US goods.

For those who are considering that it is an achievement for the US, including President Trump who is claiming this as an achievement for America are either ignoring the lessons of economic history or embracing moral values of political economy. In international political economy, the only value for states is the value of protecting and defending national interests. The phase-I of this trade deal is merely a political mirage for the American President in order to show something to the masses in the coming US presidential elections. And it is more likely that the expected phases of the said trade deal will be of same nature. In this given context, it is important to know why did Trump opt for trade war? What were the major objectives of trade war? Did the US achieve broader contours of strategic vision behind trade war? Above all, what could be the consequential fate of trade deal?

The topmost purpose to initiate trade war with China through protectionist policies of imposing tariffs was to contain China’s economic rise and influence as it was continuously challenging the existing forces of Pax-Americana.

The topmost purpose to initiate trade war with China through protectionist policies of imposing tariffs was to contain China’s economic rise and influence as it was continuously challenging the existing forces of Pax-Americana. This fact was also publicly stated by the former Secretary of State Hillary Clinton in 2011 by saying: “this is America’s Pacific century.” The manifestation of Trans Pacific Partnership (TPP), which was considered one of the greatest trade-bloc in economic history, was the first ever organised step for the containment of China. President Trump during his election campaign repeatedly said that he will take every step to restrict economic influence of China. After winning election, Trump replaced collective trade alliance with unilateral imposition of tariffs which proved a blessing in disguise for China. In the beginning, many of the US economic policymakers stated that it is best policy to contain China’s rise. The replacement of policy by President Trump proved to be an ill-conceived diagnosis. The economic wars are generally tackled through alliances particularly when enemy has equal or more influence. Embargoes, sanctions, and tariffs might result in temporary pressure because of strategic nature but the meaningful competition has largely been dependent on the domain and range of economic policy rather strategy. Till now, it seems that President Trump is trying to meet the challenge through economic tactics and ignoring policy measures. Thus, the American containment of the dragon’s rise, either through tariffs or through phase-II of the trade deal, is reflecting flawed strategies which remained fail to put counterweight to dragon’s policies.

Till now, it seems that President Trump is trying to meet the challenge through economic tactics and ignoring policy measures.

Similarly, the broader contours of Trump’s policy (essentially strategy) are obliterating the preconditions of historical economic influence of America. For instance, these are reflecting a situation in which the US is more interested in minimising or balancing its trade deficit with China rather than projecting its economic influence. Historically, the US has been getting economic leverage through its traditional allies like Britain, France, Canada and others. The classic case in this regard is Marshal Aid during the Cold War against the USSR. That is to say, it focused to curtail the Soviet’s influence through winning allies rather than just striving for security. The notion of “winning allies” is shifted to “securing it” which is proving the deterministic factor in terms of American placement in the evolving international system. Arguably, the rhetoric of trade war and trade deal or Trump’s deal to deal Xi’s Belt and Road Initiative (BRI) is enough to undo the Washington’s economic dominance.

In simple words, phase 1 of the recent trade deal is suggesting that Beijing is re-establishing itself as the new “Middle Kingdom” of the globe while Washington is trying to minimise its trade deficit with former. This situation also signifies that Washington’s assessment about Beijing has been shallow and superficial since the era of reforms and openness. According to Kevin Rudd, the former Australian prime minister, “In both reality and in perception, practically China has already become a more important economic partner than the United States to every country in wider East Asia. We all know where the wider strategic logic takes us.”

Khaqan Ahmad

Khaqan Ahmad

has done M.Phil in International Relations from the National Defense University, Islamabad. Currently, he is working as a Research Associate at the CSCR.

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