Home News The consequences of a trade war could come hard and fast

The consequences of a trade war could come hard and fast

by Tom Pattinson
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Global Trade

No one is looking like backing down in the ongoing trade war but as warning shots are fired, the consequences could come hard and fast, writes Tom Pattinson

Friction between the world’s two largest economies continues after Vice President Mike Pence accused China of meddling in the upcoming US Mid Terms. Russian interference in US elections “pales in comparison” with Chinese meddling, he claimed, following similar accusations by US President Donald Trump earlier in the summer.

No evidence was given for the accusation and cybersecurity experts contradicted the claims. Even the administration’s own secretary of homeland security, Kirstjen Nielsen, said: “We currently have no indication that a foreign adversary intends to disrupt our election infrastructure.”

The US doubled down when Secretary of State Mike Pompeo said that China and the US are in “fundamental disagreement,” during a tense visit to Beijing last month. Standing next to Pompeo, Chinese foreign minister Wang Yi said that “a direct attack on our mutual trust has cast a shadow on US-China relations.”

Security talks between the US and China planned for October were cancelled, with both sides blaming the other. This may have been due to the escalating trade war, the tense discussions over election tampering or perhaps the US Navy’s incursion into the South China Sea. The guided-missile destroyer USS Decatur sailed within 12 nautical miles of the Gaven and Johnson Reefs in the Spratly Islands as part of what the US Navy calls “freedom of navigation operations.”

It was later leaked that the US Navy was recommending the US Pacific Fleet conduct a series of operations during a single week in November as a major show of force to warn China. The exercise, it was reported, would involving US warships, combat aircraft and troops to demonstrate that the US can counter potential adversaries quickly on several fronts.

Meanwhile, Bloomberg claimed that China has inserted spy-chips in servers used by Amazon and Apple, allowing a back door to access computers and data – something Amazon, Apple and China have denied.

China needs to act globally if it wants to play globally

All in all, it’s been a tough couple of months for US-China relations. Accusations have been flying, both sides’ propaganda machines are working at full pelt and serious warning bells are ringing that suggest things could turn even nastier.

Trump has followed through on his tough stance on China that he promised during this election campaign. China, he says, has been stealing US jobs and unfair trade rules have led to the current US-China trade deficit. China has also been caught out, surprised that Trump has followed through on his threats of sanctions and tariffs, whilst gloating that the west’s democratic system has failed. Both sides need to work together to find a solution rather than continuing to spiral further and further apart.


Trump’s incessant desire to look to the past and to revive dying industries rather than promote new technologies, means that he is allowing China to leapfrog the US when it comes to new industries such as green-tech, fin-tech and AI. On the other hand, China positions itself as a paragon of free trade and globalisation, whilst restricting foreign competitors and subsidising domestic firms. It needs to act globally if it wants to play globally.

Trump thinks that trade is a zero-sum game. If one party is doing badly, it’s because the other is doing too well – trade is a war, which will be won or lost. This is not how trade works but China, who need to portray a strong image domestically and is not comfortable losing face on the world stage, is ready and willing to go head to head.

The repercussions of an escalated trade war are not inconsequential. All diplomacy is manifestly intertwined. Trade talks are held alongside discussions on other important subjects and sadly, urgent matters have been brushed to the side as trade dominates the time and energy of both the civil servants and the press. Human rights issues seem to have totally fallen off the agenda at a time when they are needed more than ever, and the environmental knock-on effects are becoming increasingly apparent. It is in the interest of not just the two countries involved but the world as a whole to start to find a compromise that will de-escalate the trade war before the two sides come to blows and the rest of the world is caught in the crossfire.

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