Bickering between U.S. & China, explained

MS Explains: Washington and Beijing seem to be in a perpetual argument. Why?

Andrew Koay| May 18, 03:57 PM

It seems like every week, we get another headline indicating escalating tensions between the world’s two superpowers — the United States and China.

Things had looked to be on an upward trajectory earlier this year in January when the two nations inked a trade deal, bringing a truce to their trade war.

However, relations between the two colossal powers took a sharp dive again as the outbreak of a new coronavirus in the Chinese city of Wuhan developed into the global Covid-19 pandemic.

On May 14, President Donald Trump even suggested that he might cut ties altogether with China, according to Reuters.

“They should have never let this happen,” he said.

“So I make a great trade deal and now I say this doesn’t feel the same to me. The ink was barely dry and the plague came over. And it doesn’t feel the same to me.”

What’s behind all the bickering going on between the U.S. and China?

Here are some of the factors underlying the conflict.

"Americans First"

The start of Trump’s term in 2017 actually saw the president get off on the right foot with his Chinese counterpart Xi Jinping.

Despite Trump’s frequent bashing of Beijing while campaigning for the presidency, The Guardian reported that a May 2017 meeting warmed ties and saw the U.S. president call Xi a “great guy”.

A trade deal between the two nations was announced shortly after with American commerce secretary, Wilbur Ross, hailing U.S.-China relations to be “hitting a new high”.

However, by March 2018, a sharp turn was taken as Trump announced his intention to slap huge tariffs worth at least US$50 billion (SGD$71.5 billion) on Chinese imports, according to AP.

It signalled a return to his “America First” rhetoric and the start of the trade war that has come to define relations between Beijing and Washington.

Those who followed Trump’s presidency campaign would not have been surprised by the escalating tensions over trade.

According to The New York Times, Trump’s popularity amongst supporters was in part gained by tapping into nostalgia over past economic fortunes, especially in the area of manufacturing.

His attacks on the campaign trail centred on trade deals that he claimed impoverished sections of America’s population, calling agreements with China unfair on U.S. workers, who have to contend with products from overseas that can be produced at lower cost.

By imposing tariffs or taxes on imports from China, as the logic goes, the Trump administration can raise the prices of Chinese goods, protecting American jobs in the process.

Therefore, Trump’s hardline and often antagonistic stance towards China can be viewed as consistent with the promise he made to electors to “make America great again”.

It is worth noting that many economists have warned that Trump’s tactics will end up harming the American economy in the longer term.

“Protectionism will leave the U.S. economy worse off, with less-efficient firms, lower productivity and lower wages,” wrote Bloomberg columnist Michael Strain.

Economic Nosedive

However, a booming (or at least relatively healthy) economy had been a point of pride for the Trump administration in the three years since he took office.

A reality check by the BBC deemed that under Trump, the economy had been doing well, though it was not the “greatest” in the history of U.S. as the president often claimed.

Gross Domestic Product (GDP), which is the monetary value of all finished goods and services made within a country during a specific period, has generally been strong.

GDP for the U.S. grew at an average of 2.3 per cent in 2019.

Unemployment also dropped to 3.6 per cent in January 2020.

The last time that unemployment was lower than 3.5 per cent, was December 1969.

That was until the Covid-19 pandemic reached the U.S.

Since then, the U.S economy has taken a steep nosedive as businesses shut and people were confined to their houses under lockdowns.

Data from the U.S. Bureau of Labor Statistics showed national unemployment at 14.7 per cent in April 2020.

According to The Guardian, these are levels unseen since the 1930s when the U.S. was in the midst of the Great Depression.

Trump himself has come under fire for how he’s handled the pandemic, with many criticising his initially lax attitude towards the virus.

Some analysts, such as James Palmer writing for Foreign Policy, have suggested that Trump’s recent targeting of China may be a ploy to deflect blame over his bungled handling of the pandemic with U.S. presidential elections looming later this year.

It has culminated in a recent high-profile squabble which saw U.S. Secretary of State Mike Pompeo backing Trump’s assertion that Covid-19 came from a research laboratory in Wuhan, China, according to The New York Times.

The New York Times also posited that Trump’s campaign team and Republicans see taking a hard stance on China as a strategy to bolster his chances at re-election.

On the other side of the fence, Chinese officials in charge of negotiating U.S.-China trade terms also face pressure from nationalists who prefer a more antagonistic relationship.

China itself has tried to direct attention away from its own missteps in controlling the virus in similar fashion to Washington.

In March 2020, Chinese officials and news outlets began to spread a conspiracy theory that Covid-19 had actually been brought to Wuhan by the U.S. Army during a visit in October 2019 reported The New York Times.

Shifting global order

Conflict over trade and Covid-19 have developed against a backdrop of China’s increasing power, presence, and influence in the global system.

The U.S. which has long held onto the role of the world's de-facto leader, has seen that position come under threat from China’s rise.

The Atlantic, which described the contest between the two nations as one “over who gets to shape world in the coming century”, pointed out how longtime allies of the U.S. have appeared increasingly reluctant to alienate Beijing.

This was especially illustrated by the United Kingdom’s decision to allow Chinese company Huawei to provide equipment for Britain’s next-generation 5G mobile network despite lobbying from Washington.

Underscoring China’s rise relative to the U.S. is the fact that it owns huge amounts of American debt.

As of February 2020, China held almost US$1.1 trillion in U.S. treasury bonds (in oversimplified layman’s terms, this means that China has loaned US$1.1 trillion to the U.S.).

This makes China, the U.S.’s second largest creditor after Japan.

The two have consistently topped the list, records dating back to 2000 show, occasionally exchanging positions according to data from the U.S. Treasury.

The possibility of Beijing weaponising its large holding of U.S. debt was brought up as a possibility last year, at the height of the trade war.

However, such a move has been dismissed by many, with The Economist pointing out that if China were to try and dump its U.S. bonds, one likely outcome would be for the Yuan to rise, hurting Chinese exports.

In the end, with the U.S. in the doldrums thanks to the pandemic, China may be hoping that there will be more opportunities to remould the world order as it sees fit.

But judging from how things have gone so far, we can expect to see Washington jostling to retain its position.

Mothership Explains is a series where we dig deep into the important, interesting, and confusing going-ons in our world and try to, well, explain them.

This series aims to provide in-depth, easy-to-understand explanations to keep our readers up to date on not just what is going on in the world, but also the "why's".

Top image from Donald Trump's Facebook page