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Trade fight with China worse than the Cold War

By Harlan Ullman, Arnaud de Borchgrave Distinguished Columnist
Trade fight with China worse than the Cold War
China's top foreign language newspaper featuring a front-page story on U.S.-China trade is sold in Beijing on September 16. File Photo by Stephen Shaver/UPI | License Photo

If the tensions between the United States and China truly constituted a new "Cold War," as many pundits are asserting, the United States would be far better off. The United States won the last Cold War. But in precipitating a confrontation with China, the United States is starting a war it cannot win and could easily lose.

The Cold War was an ideological and geostrategic clash between East and West. The Soviet Union was a "superpower" only in the context of military and not economic strength. The struggle was contained by the threat of a societal-threatening thermonculear war in which "deterrence" had real meaning. And it was a conflict in which the United States had dozens of allies and friends aligned against the Soviet Union.

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None of those conditions applies today. China has the second-largest economy in the world. Its technology in many areas is first class. Its nuclear arsenal, unlike the Soviet Union's, is small and likely to remain inferior to America's. Ideology plays no role except, ironically, that both sides prefer market economies.

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Many of America's friends in Asia are not prepared to ally militarily against China, even as Beijing occupies and fortifies tiny islets in the China seas and advances its territorial claims. And "deterrence" that worked in the Cold War has little effect in containing China's ambitions in so-called grey areas and territorial aggrandizement.

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While China has attempted and often exploited the United States and others infringing on or stealing intellectual property; rigging the Renminbi to advance its economic interests; and denying foreign companies rights in China, these issues could have been negotiated through the Trans Pacific Partnership. The Trump administration withdrew without an option or with good reason. In fairness, Hillary Clinton promised to do the same.

Instead, the Trump team has embarked on a destructive trade war with China. If history is relevant, everyone loses in a trade war. In this confrontation, the White House has abandoned multilateral arrangements for bilateral diplomacy as a better alternative. Unfortunately, with nearly 200 independent countries, even selective bilateralism is physically impossible to orchestrate.

Harvard's Graham Allison recalls the so-called "Thucydides Trap," in which emerging powers went to war with the leading power of the day and asks how is this trap avoided? That history is by no means absolute as China does not want a shooting war anymore than America does. However, a needless economic and financial fight will be devastating to both parties and to the world economy.

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Hence, this evolving crisis with China is not a new Cold War. It is a cultural-economic clash brought on by a novice and strategically incompetent president believing that tactics of the real-estate industry such as threats and bullying will work against China and its Middle Kingdom mentality. Worse, the White House's understanding of these issues ignores several potentially fatal societal flaws that could cause China to implode.

Roughly half a billion Chinese live at or under the poverty line. Sustained and substantial economic growth is essential to keeping ahead of these demographics. Chinese emperors and general secretaries have feared the next peasant revolt or revolution that occurred roughly once a generation. Huge debt and a real estate bubble complicate these worries. A trade war could shatter these flaw lines.

History offers a warning far more chilling than than the Thucydides trap. After the crash of 1929, America's Smoot Hawley tariffs had hugely negative impact particularly felt in Japan where the democratic Taisho government was very much opposed by the Army. Silk was Japan's major export. Smoot Hawley basically destroyed silk exports to America, exacerbating a disintegrating Japanese economy. In 1932, as the Depression grew deeper, the Japanese Army took charge and one can argue, World War II became inevitable.

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Are we at that point with China? Not yet. But unlike the Cold War, when conflict was not inevitable because both sides understood the rules of the game in a thermonuclear age, an economic meltdown does not necessarily come with inherent constraints. China is surely not a democracy, as Japan was after the first World War. Yet, stoking an unnecessary trade war when other options exist for resolution could prove as catastrophic as Smoot Hawley did in the Pacific nearly a century ago.

The Cold War never went hot. Today, while a shooting war between China and America is remote, a meltdown is not. Does anyone in the White House or Congress understand where this confrontation could be headed and its consequences? The answer is nyet.

Harlan Ullman is UPI's Arnaud de Borchgrave Distinguished Columnist. His latest book is "Anatomy of Failure: Why America Has Lost Every War It Starts." Follow him @harlankullman.

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