More than 18 months in, the trade war between the United States and China is not having its intended effects. Despite a flurry of US-led tariff hikes on Chinese products followed by China's retaliatory tax increases on American-made goods since January last year, the government of President Donald Trump is not perceived to be winning the trade conflict. China has proved more resilient and resourceful than many had anticipated. What this means is that the trade war is going to last much longer than many had expected. It is also likely to spread to other areas beyond trade and degenerate into a full-fledged non-military war.
All indications point to a gruelling conflict between the two superpowers. The US has suffered a trade deficit with the rest of the world for decades. In the past, Washington willingly underwrote what was necessary for a working international economic system. But under the Trump administration, it has reversed gear and wants payback and reciprocity from other countries. Its biggest worry is China, a rising and rival superpower that enjoys a $375-billion trade surplus with the US, by far the biggest surplus among all countries that sell more to the US than they buy.
But the Trump tariffs have not hurt China as much as anticipated. According to China's customs department, as reported in the mainstream international media, Chinese exports in the first seven months of 2019 came to $145.6 billion, compared with $146 billion in 2018, which was a record export year for China. The slowdown in Chinese exports in the face of the US tariff offensive is therefore negligible.
Moreover, China's working-age population has begun to decline, which obviates the need for the breakneck growth that was necessary in the past to create jobs and absorb newly available workers. In other words, China has a cushion for an economic slowdown below its new 6% range. If the US-China economic face-off turns nastier, the US might have less latitude and flexibility to handle the mutual damage and fallout.
On the other hand, the trade war has expanded to technology. The case of Huawei and its groundbreaking 5G technology is telling. China certainly has faced pushback from partner countries, such as Australia and New Zealand. Yet other countries that the US has leaned on hard to reject Huawei equipment over fears of spyware and espionage have demurred, including the United Kingdom, France and Germany. These US allies may still end up with Huawei equipment.
The problem with technological rivalry on the US side is that the Trump approach derives from resentment rather than inspiration. It is not to outdo China in technological prowess but to prevent China from achieving greater heights. The US has faced a nemesis of China's scale and scope before, in the form of the Soviet Union.
After being outpaced by the Soviets, who sent the first artificial satellite -- Sputnik -- into space in the late 1950s, the US under President John F Kennedy redoubled its efforts in the 1960s to surpass its adversary. In an inspirational approach, President Kennedy rallied his country and put resources into action with an eye to landing a man on the moon by the end of the 1960s.
But instead of trying to rise above China, Mr Trump wants to pull it down below America. Instead of mobilising and incentivising America's top talent to outperform China in 5G or calling for 6G, Mr Trump wants to hinder and derail China's 5G.
Mr Trump has to be concerned that China is a rival superpower superior to the Soviet Union. China has blended its totalitarian state with market capitalism, resulting in a hybrid of centralised control and market-consistent economic dynamism. This makes China a logical successor to the Soviet Union and a much more formidable foe for the US. A critical issue will be how long the conflict remains non-military. As China knows that economic power is not enough and that military might will be necessary, Beijing has undertaken unprecedented arms build-up and military modernisation programmes.
Cognisant of this, the Trump administration has come up with its Free and Open Indo-Pacific as a geostrategic playbook. In this context, the US is likely to maintain its military pre-eminence since its toolbox of economic statecraft may fail to hold back China's momentum as a rival global superpower, including with an unmatched fleet of aircraft carrier groups that continue to dominate the seas. Unsurprisingly, the US defence budget in the current fiscal year tops $716 billion, an 11% year-on-year increase, notwithstanding a federal deficit of $4 trillion. Whether times are hard or easy, US military expenditure keeps growing apace.
As China needs time to strengthen its military capabilities, particularly the production of more aircraft carriers, it will have to do battle using trade and investment, technological innovation, and deft diplomacy. Its premier geostrategic platform is President Xi Jinping's Belt and Road Initiative, launched in 2013.
The BRI is akin to China's "manifest resurgence" in reclaiming past glory and greatness from the millennium-old Silk Road and the maritime expeditions of the early 17th century. If fully realised, BRI will enable China to become a Eurasian superpower with a global sphere of influence encompassing Asia and the Middle East to eastern Africa and the maritime borders of Europe.
The US-led FOIP and China's BRI amidst regional dynamics will spell daunting challenges for Thailand. While all countries will lose if the US-China trade war persists and intensifies, Thailand in the short- and medium-term can position and prepare itself to attract some of the firms, professionals, and capital that will move from China. For example, Thai immigration policy and its foreign investment regime should be revamped to provide incentives for foreign talent. As the US-China non-military war spreads to currency manipulation and culture and education, such as the reconsideration of Chinese Confucius institutes and the number of Chinese students on US campuses, Thailand and its neighbours must prepare to navigate what will likely be a perilous international environment in the months ahead.
Thitinan Pongsudhirak is an associate professor and director of the Institute of Security and International Studies at Chulalongkorn University’s Faculty of Political Science, with more than 25 years of university service. He earned his MA from The Johns Hopkins School of Advanced International Studies and PhD from the London School of Economics where he was awarded the UK’s top dissertation prize in 2002.