“It is the economy, stupid.” the Clinton campaign strategy is brought to life again by U.S. President Donald Trump in international relations. At least that is what Yan Xuetong thinks about Trump’s trade war.
“Trump chooses to confront against China in the economic domain, rather than political and security fields like his predecessors. That’s why he initiated a trade war at the first place,” said Yan, dean of the Institute of International Relations at Tsinghua University, in an interview with CGTN’s Zoom In.
The 11th round of trade negotiations ended in Washington on May 11 without a deal, crashing the hope that the impasse could be ended soon.
The U.S. accused China of “reneging” on trade commitments it “has made” in early rounds of talks, which China had firmly denied.
“We believe before we reach a deal, any changes are natural, and inevitable in the whole process,” said Chinese Vice Premier Liu He, Beijing’s top trade negotiator, to reporters in Washington after the talks.
Liu also outlined three main differences keeping the two sides from reaching a deal: China’s call on both sides canceling all punitive tariffs, the figure for Chinese purchases of U.S. goods, and a balanced text of the agreements.
“We did not backtrack. We had disagreements over how to write some of the text is all,” he said, “any country has its own dignity.”
But no matter what is behind the deadlock, immediate harm has been caused. Both stocks slumped after the announcements of new tariffs. Though employment rate in America drops to 3.6 percent in March, reaching a decade low, U.S.-based employers announced 230,433 job cuts through April, up 31 percent from the same period a year ago, according to outsourcing firm Challenger Gray & Christmas.
Many experts argued the Trump’s tariffs on Chinese goods are a bill paid by the American consumers.
A study by the Trade Partnership indicates the new 25 percent tariffs, combined with earlier taxes imposed on 50 billion U.S. dollars in Chinese shipments and steel and aluminum, would cut U.S. employment by 934,000 and cost the average family of four 767 U.S. dollars a year.
And if the U.S. moves ahead with 25 percent tariffs on everything China exports to the U.S., it could amount to a tax hike of more than 2,000 U.S. dollars on the average American family, according to a report by Politico.
“Both sides will do comparative studies on how much they benefit more from the other. If they can cause more damage for the other side than themselves, the trade conflicts will be continued,” Yan Xuetong said.
If a deal can be reached eventually, “it means both sides face less damage or loss caused by the trade war. It doesn’t mean that they will benefit from it, but just reduce further harm,” Yan added.
The self-inflicting harm is generated by the priority of the Trump administration – a booming economy which includes a rise of jobs, a renaissance of manufacturing, and a reduce of trade deficit, though many economists have reiterated that the trade gap doesn’t equate to money “lost” to other countries, as trade imbalances are affected by a combination of factors, such as relative growth rates of countries, the value of their currencies, and their saving and investing rates.
Last week, the U.S. added Huawei Technologies and its affiliates to the Bureau of Industry and Security Entity List, barring the Chinese telecom company from U.S. communication networks, citing national security risks. On Monday, Washington pulled off the move by 90 days, to maintain existing networks and provide software updates to existing Huawei handsets.
“The real concern is not security. It’s wealth,” said Yan Xuetong, “because the digital economy heavily relies on the communication technology a country processes. The most advanced communication technology will generate wealth faster than others.”
“But when a country gave the priority to economic interests, that indicates the country becomes weaker,” Yan added.
Zou Yue: – Welcome to Zoom In with me. And today I’m honored to have invited Professor Yan Xuetong, a renowned scholar of international relations from Tsinghua University, to talk about big power relationships, to talk about U.S.-China trade war, and how the international relations will be reshaped in the future. So welcome, Professor Yan.
Yan: – Thank you.
Zou Yue: – Let us start with the headline-making story. That is the U.S.-China trade war. Why do you think there is a trade war in the first place and where we are now?
Yan: – Ok. First, it is because Trump has a different preference for the strategy confronting against China. And during the Obama’s period or before the Obama, the American government’s main concern was to confront China in political and security fields and rather than economic fields. They were concerned China and the U.S. share a lot of economic interests and it is not necessary for the U.S. to contain China in the economic domain. But Trump has a different concern. So he gave the priority to economy, but mainly for trade. That’s why he initiated a trade war with China. And concerning the current situation, it seems to me, both sides still want to continue the negotiation rather than end it. So I think that there will be a few rounds of negotiations between China and the U.S., but I cannot guarantee they would reach an agreement finally, I don’t know.
Zou Yue: – If they can come to an agreement, what kind of agreement will it be and what does it mean for China’s economy and the U.S. economy?
Yan: -Well, if they reach an agreement, it means both sides face less damage or loss caused by the trade war. It doesn’t mean that both sides will benefit more from it. If they can cause more damage for the other side than themselves, they will still continue this trade conflict.
Zou Yue: – The White House is right now, some say is occupied by a group of nationalists, thinkers like Robert Lighthizer, Peter Navarro, and formerly by Steve Bannon. They believe America has been ripped off by China systematically. That’s why they need a historic turn over everything. Do you think their thinking and strategy will make a difference on the policy of the administration?
Yan: – Well, I think it’s very obvious. This government gave the first priority to American economic interests rather than America’s international leadership. So, this is an issue about the sequence of the priorities.
Zou Yue: – But do you think Trump prioritizing economic competition with China will serve America well?
Yan: – I’m not so sure. And a country giving the priority to economic interests indicates the country is becoming weaker.
Zou Yue: – People are saying, the capabilities of a nation will largely depend on the technological prowess. Whether you can claim the high-end of value chain depends on your technological know-how.
Yan: – Traditional powers, when they talk about technology, they mean military technology. It doesn’t mean the use of technology to generate wealth, to generate money. These are different concepts. So currently for Trump, the concern is the 5G and under the excuse of national security… Actually, from my understanding, the real concern is not security. It’s wealth. Because the digital economy is heavily relied on the communication technology.
Zou Yue: – But you don’t buy the idea that their technology competitiveness will give them a better chance at international leadership.
Yan – Well, that depends on the different age. In the traditional age, the military technology superiority will make a country have a strong international influence. But today possibly, the economic technology results in that way. So that really depends on the concrete situation. We cannot say that if a country has better technology than others, it will become the dominant one, not necessarily.