Injury not remedy

CAI MENG/CHINA DAILY

Trade war is not a panacea for US' social problems

The tariffs imposed by the Donald Trump administration on China recently expired. But the US government is not canceling the tariffs but planning new economic bullying against China. If the United States adheres to the wrong economic policy, trade protectionism will continue to negatively affect US society.

Former US president Trump accused China of unfair trade practices during his election campaign. After taking office, he launched a Section 301 Investigation of China in August 2017. On March 22, 2018, the Trump administration started imposing additional tariffs on products from China. It kept increasing the tariffs on Chinese products, imposed sanctions on Chinese companies such as ZTE, and violated its commitments and asked for more concessions during the Sino-US trade negotiations, leading to escalation of the trade war.

The trade war has continued under the Joe Biden administration, as it has maintained the tariffs and continued to sanction Chinese tech companies.

The trade war launched against China was prompted by US anxieties. The middle-class crisis in the US is escalating. Since the Ronald Reagan administration, the situation of workers and small businesses in the manufacturing sector in the US has continually worsened, and the gap between the rich and the poor has widened. As a result of anti-globalization, right-wing populism has gained traction. Populist politicians such as Trump have blamed "unfair" global trade for difficulties facing the middle class in the US and advocated for protectionism to protect the interests of domestic workers.

The relative decline of US national power has also caused anxiety in the country. Some hawks regard the rise of China as a threat to US hegemony, question the engagement policy of the US toward China since former president Richard Nixon, and believe that it was a "strategic mistake" for the US to allow China to participate in globalization. They regard the economic interdependence between China and the US as an obstacle to efforts to oppose and contain China, and claim that the US should "decouple "from China. US hawkish politicians and right-wing voters have shaped US trade policy, escalating the trade war with China.

But trade protectionism actually does more harm than good to the US. In 2018 alone, the trade war led to decline of US revenue by $1.4 billion per month, and rising commodity prices have caused consumers to spend $3.2 billion more per month. The brunt of the trade war has been borne by domestic companies and workers in the US.

As of March 2019, the overall US trade deficit had reached $621 billion. The US has failed to reshore manufacturing and reduce the trade deficit, and lost revenue from tariffs on China due to the contraction of Sino-US trade. Recent research shows that persisting with the tariffs will lead to an additional expenditure of $51 billion for US businesses and consumers.

Rather than being an economic policy, the trade war is a political tool aimed at containing China. The US has regarded China as its primary threat since the National Security Strategy Report issued in 2017, and it has kept introducing trade policies to suppress China's development, including establishing a "secure supply chain" that excludes Chinese companies, containing Chinese tech companies through sanctions and supply blockades, smearing China on its overseas economic cooperation, and ganging up to rewrite the international trade rules.

Over the past five years, the trade war has brought severe challenges to some Chinese industries, especially its tech companies, but it has not collapsed China as the hawks hoped. China has developed its dual circulation paradigm in which domestic and overseas markets reinforce each other, promoted its opening-up policy and expanded its international cooperation. It has also tapped into the potential of its domestic market, and improved its independent innovation.

As the US has been cooperating with some countries in a bid to establish new international rules, China has been working for a greater say in the international economic and trade field and boosted South-South economic cooperation. As long as China maintains economic vitality and keeps opening up, it will be difficult for the US to build a global economic order that is dominated by the US and other Western countries and excludes China.

The Biden administration knows that the trade war is not worth it. The article "Making US Foreign Policy Work Better for the Middle Class", usually regarded as the guideline for Biden's 2020 election campaign, said that the work and life of the majority of US people depend on cross-border trade, and economic protectionism is not a panacea for easing the anxiety of the middle class. The article also criticized the "new Cold War" of some US politicians, who have disregarded the interests of the US people.

However, the Biden administration has continued the Trump-era trade protectionism, intensified sanctions on Chinese tech companies and promoted the building of "technology alliances" and "safe supply chain alliances" that exclude China. It has hyped up a "China threat" to unite voters. As some US politicians cannot solve problems of the well-being of the middle class at home, they can only divert the contradiction by accusing China of unfair trade practices.

The US has embraced a zero-sum Cold War mentality and sought to sabotage globalization and global development cooperation, which has escalated the economic and political risks facing the country. To cater to anti-China politicians and populists, the US government may not soften its economic policies toward China no matter which president takes office. Yet the trade war cannot address the livelihood problems of the US middle class, as the current economic predicament in the US suggests.

Facing inflation and election pressure this year, officials such as US Treasury Secretary Janet Yellen have begun to deliver signals of reconciliation on tariffs. However, some hawks still try to block the reduction of tariffs. To address the difficulties facing the US middle class, the US should stop the trade war with China, change strategic hostility to China, abandon the Cold War mentality, and work with China to explore ways of peaceful coexistence.

The author is an assistant research fellow of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn