China and America May Be Forging a New Economic Order

While tariffs are undoubtedly a distinctly Trumpian weapon, politicians on both sides of the aisle generally agree that China’s habitual intellectual-property theft, forced technology transfers, and joint-venture requirements significantly impair the future health and competitiveness of America’s leading businesses. In 2014, President Barack Obama delivered public comments lambasting China’s approach to intellectual-property protection and state-owned enterprises. Just this March, Senator Elizabeth Warren noted that the past two decades of U.S. policy, which sought to engage China in order to secure concessions on market access for U.S. companies, was misguided. Senator Chuck Schumer has publicly said that one of the only Trump policies he supports is the administration’s tougher China approach.

So although key constituencies, such as the U.S. Chamber of Commerce, argue that tariffs are an inappropriate tool to prosecute the trade war, it is clear that a change in administration will not substantially diminish America’s appetite for systemic change in the economic relationship. In other words, the dispute predated and will outlast Donald Trump. The conventional bipartisan wisdom that dialogue with Beijing can change China’s approach has been shattered. It’s clear now that there’s no returning to the status quo ante.

Further complicating matters for Beijing is dissent within China’s elite about China’s future economic model. Chinese Communist Party (CCP) propaganda continues to depict U.S. demands as synonymous with a broader containment strategy designed to stymie China’s rise. However, many of the privatization reforms demanded by the U.S. are goals identified in China’s own official planning documents issued in 2014, but that President Xi Jinping has failed to meaningfully implement.

Rhetorically, China’s state media gives lip service to continued “reform and opening.” But this year’s 40th-anniversary celebration of Deng Xiaoping’s signature economic initiative has been whitewashed to venerate Xi and his late father.

Privately, some Chinese scholars and elites dismayed with Xi’s strong focus on preserving the state’s role in the economy have told me they are cautiously supportive of Trump’s trade war, as they see America’s ire as their only recourse to pressure Xi to return to market liberalization. A burgeoning middle class in China, increasingly college educated, will seek service-industry jobs created primarily by China’s private sector.

Therefore, although Western onlookers might only see U.S. demands as the key factor pushing China to make concessions in the trade war, it is critical to remember that the Communist Party must grapple with potentially precarious internal dynamics of its own at home.

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