Deal or No Deal, the Rivalry Between the US and China Will Intensify

The recent collapse of trade talks between the U.S. and China sent shock waves through the global capitalist system. Almost everyone had expected a deal to be struck, including President Trump, who had predicted it would be “epic.”

When it all fell through, he blamed China for the failure and escalated what had been a low-intensity trade war into a full-blown one. He increased tariffs from 10 to 25 percent on $200 billion of Chinese exports to the U.S. and threatened to impose 25 percent duties on another $300 billion. Once those go into effect, all of China’s exports will be subject to tariffs.

With the gauntlet thrown down, Beijing announced it would raise levies from 10 percent to as much as 25 percent on $60 billion worth of U.S. exports. A spokesperson on its state television warned, “If the U.S. wants to talk, our door is open. If the U.S. wants to fight, we’ll be with them till the end.”

The threat of a trade war spooked investors throughout the world. In a massive selloff on stock markets around the world, they wiped a trillion dollars off the books. U.S. multinationals like Apple and Boeing, which are heavily dependent on China and would be affected by the new tariffs for the first time, were hammered particularly hard.

The markets seem to have stabilized in the hopes that the two powers will reach an agreement at talks in Beijing later this month, or when Trump and Chinese President Xi Jinping meet at the G20 Summit in Osaka, Japan, at the end of June. Regardless of whether or not they strike a deal, the growing conflict between the two powers will not abate; it is the central inter-imperial rivalry of the 21st century.

Trump Blew Up the Talks

Trump doomed the talks to failure by making demands China would never meet. He views China as a state-capitalist power that is violating the free market rules of the neoliberal world order to advance its rise as an imperial power and challenge the U.S. for global supremacy.

He wants to bring it to heel. So, he insisted that China stop violating intellectual copyrights, grant foreign investors equal market access, stop forced technology transfer and end state subsidies to private corporations. He called for all of these to be written into Chinese law.

China judged these demands as an attempt by Washington to defend its global dominance, violate China’s national sovereignty, and prevent its reemergence as a world power. Unsurprisingly, Beijing refused to agree to them, escalating the conflict between the two biggest economies in the world.

The Road to Imperial Rivalry

Such imperial rivalry is exactly what the U.S. has sought to avoid since the end of the Cold War. It pursued a grand strategy of superintending neoliberal world order, incorporating other states into it with the promise of “win-win” globalization, co-opting any potential peer competitors in the process, and enforcing its rule against so-called rogue states with sanctions and regime change.

As part of this project, the U.S. adopted a policy toward China that combined engagement and containment into what many call, “congagement.” It offered Beijing carrots like joining the World Trade Organization on the condition that it accept its neoliberal rules. But it also waved the stick of military power through naval patrols and bases throughout the Asia Pacific.

Washington struck deals with Beijing to allow U.S. multinationals to subcontract production to corporations in China that exploited the country’s cheap labor force to manufacture products like Apple’s iPhone. In the process, Beijing transformed itself from an economic backwater into the world’s second-largest economy.

While China rose, the U.S. suffered relative decline. It poured countless lives and funds into futile wars in Afghanistan and Iraq, saw its economy devastated by the Great Recession, and got mired in political polarization and paralysis in Washington. Of course, it remains the world’s only superpower with the largest economy, the most powerful military, and therefore, the greatest geopolitical influence.

Xi Jinping Projects China as a Great Power

But Washington’s relative decline opened the door to China to assert itself as a new imperial power. China’s President Xi did just that: He abandoned his predecessor’s grand strategy of a “peaceful rise” and adopted a new one he calls “the China Dream of Grand National Rejuvenation,” which aims to compel the rest of the world to recognize Beijing as a great power.

China launched the $1 trillion “One Belt, One Road project that aims to develop transport infrastructure to integrate China with the economies of Europe, Asia and Africa. He also launched “China 2025,” the project that funnels state money into high-tech corporations to turn them into national champions able to compete with rivals in the U.S. and Europe.

China modernized its military, especially its navy, which is specifically designed to confront the U.S. It established bases on islands throughout the South and East China Seas to control strategic shipping lanes previously policed by the U.S., lay claim to fisheries, and assert its rights to undersea oil and natural gas reserves.

It also established its first overseas military base in Djibouti on the Horn of Africa, adjacent to the key shipping lane to the Suez Canal. The Pentagon warns that this is just the beginning; it claims that China will construct an entire network of bases through One Belt, One Road construction projects to rival the U.S., which until now had a near monopoly on such military outposts.

Trump’s Economic Nationalist Strategy

Thus, Washington’s policy of “congagement” backfired, unintentionally helping to turn China into a peer competitor. Trump seized the presidency on the promise that he could “Make America Great Again” and defeat China with a new strategy of economic nationalism.

Once in office, he “put America first,” skirting multilateral institutions, treating allies in a transactional fashion, and even imposing tariffs on Canada and Europe. In his National Security Strategy, he downplayed the so-called war on terror to focus on confronting great power rivals, in particular China and Russia.

Trump launched trade talks determined to bring China to heel, tried to lure countries like Vietnam and others into the U.S. orbit through bilateral trade deals, threatened to recognize Taiwan as a sovereign state, and deployed the Navy to police the Asia Pacific, leading to repeated confrontations with Chinese vessels.

Trump’s Defense Department warned that the U.S. military industrial complex’s dependence on supply chains in China was a threat to national security. To overcome this, the Defense Department argued for the federal government to enact an industrial policy to redevelop its domestic manufacturing base and stipulated that any offshore military production be shifted out of China to allied countries.

Trump also singled out China’s high-tech industry as a threat to national security, particularly Huawei, which is leading the construction of 5G networks throughout the world. Afraid the Chinese state will use these to violate cybersecurity and spy on U.S. corporations, he banned the company in the U.S. and is trying to force U.S. allies to do the same.

U.S. Capital and the Democrats Back Trump

Trump’s economic nationalism has posed a dilemma for U.S. capital. Its multinational sector remains committed to the old strategy of the U.S. state overseeing a neoliberal order of free trade globalization.

But they have grown frustrated with China’s state capitalism, especially its theft of intellectual property estimated to cost U.S. corporations as much as $600 billion each year. That’s why a majority of corporations surveyed by the U.S. Chamber of Commerce supported Trump’s tariffs to pressure China into a new trade deal.

The political class, state managers in the imperial bureaucracy, and both of the U.S.’s capitalist parties have also lined up behind Trump. The Republicans, previously ardent advocates of free trade, have been cowed into toeing the line.

The Democratic Party, from its corporate leadership to its progressive dissidents, has either remained silent for fear of losing voters seduced by Trump’s protectionism or staked out positions to his right, demanding that he take an even harder line in negotiations.

Except for neoliberal former Vice President Joe Biden. He downplayed the threat China poses, reassured people of U.S. supremacy, and challenged Trump’s confrontational approach, especially his tariffs. He boasted, “China is going to eat our lunch? Come on, man…. They’re not bad folks, folks, but guess what. They’re not competition for us.”

The bulk of the Democrats, however, adopted a liberal-nationalist position. Senate Minority Leader Chuck Schumer tweeted: “Hang tough on China, President. Don’t back down. Strength is the only way to win with China.”

Sen. Elizabeth Warren, the doyenne of pro-capitalist progressives, declared that “China weaponized its economy” while she promised to save U.S. jobs with protectionist legislation and renegotiated trade deals.

Not to be left out, self-proclaimed socialist Sen. Bernie Sanders attacked Biden for being soft on China and promised he would better lead the U.S. struggle against China. “It’s wrong to pretend that China isn’t one of our major economic competitors,” he tweeted. “When we are in the White House, we will win that competition by fixing our trade policies.”

Will Trump Decouple “Chimerica?”

The hard nationalists like Peter Navarro in Trump’s cabinet and others on the sidelines like Steve Bannon are pushing for U.S. capital to decouple from China. Others like White House economic adviser Larry Kudlow are intent on forcing a deal through to open up China to further investment, but it’s hard to believe that Beijing would agree to those terms.

Meanwhile, decoupling is beginning to happen. Multinationals worried about the trade war, frustrated with China’s policies, and unwilling to pay for the rising cost of Chinese labor are starting to relocate production to lower-wage countries like Vietnam, as well as countries closer to home like Mexico, according to The New York Times.

China may also begin to reorient its economy away from dependence on the U.S. to develop its own capacities and relationships with other countries. Many Chinese companies are talking about the end of “Chimerica.”

Chinese nationalists, especially in its army, are eager to push just such a separation. “President Xi Jinping sees a test of China’s mettle,” as The Economist notes. “Protectionism is making it hard to obtain vital technologies from abroad, he declared last September. China must take the ‘road of self-reliance.’”

It could double down on exactly the path of state-sponsored capitalist development like China 2025 that has raised the hackles of the U.S. state and capital. It will also try and find alternative sites for investment to the U.S. through One Belt, One Road; other sources for the commodities it needs; and other markets for its products, especially the European Union.

Geopolitical Conflicts Multiply

The increasing geopolitical conflicts between the two powers could drive them further apart. They are at loggerheads over North Korea, Taiwan, Iran, Venezuela, and control of the South and East China Seas, as well as the Arctic Ocean. Of all of these, their clashes over Iran and Venezuela are perhaps the most important.

Trump is committed to regime change in the two countries, both of which are allied with China. In the case of Iran, he has already used charges that Chinese companies are violating sanctions on Tehran to temporarily ban the sale of technology to Chinese tech corporation ZTE, which nearly destroyed it, and to arrest Huawei’s executive Meng Wanzhou.

On top of that, he just imposed sanctions on Iran that bar the purchase of its oil, a direct threat to China, which is the largest purchaser of the country’s crude exports. In response, Beijing has demanded Trump back down from threats of regime change, engage in multilateral talks to preserve the nuclear accord, and drop its sanctions on oil, even going so far as to imply it may violate them.

Similarly, Trump is intensifying efforts to topple Nicolás Maduro in Venezuela by recognizing right-wing opposition leader Juan Guaidó and maintain brutal sanctions on the country. Beijing reacted by denouncing Trump for attempting a coup and backing Maduro, because it is heavily invested in the country’s oil industry and fears the precedent of a regime change policy that could target China in the future.

Will They Fight or Make Up?

At the same time, the interdependence of the U.S. and Chinese economies and the threat that spiraling conflict over trade or geopolitics could damage the world economy, could drive Trump and Xi to back off. They have every reason to be concerned about this. Despite both leaders’ boasts about their economies, both are fragile.

China’s growth continues to slow, and its attempt to quicken it has piled up debt and massive overcapacity throughout the system. The U.S. economy, regardless of Trump’s boosterism, suffers from underlying problems of weak investment, low productivity, massive public and private debt, and low workforce participation.

Neither state wants the trade war and geopolitical conflicts to tip them into a recession. At the same time, neither the U.S. nor China can afford to be perceived as giving in at the negotiating table, especially with nationalist factions braying for sharper confrontation.

This pressure will only grow in the event of an economic slowdown or larger geopolitical confrontation, and both Trump and Xi as extreme nationalists will not hesitate to rally their nations behind them. Even in such situations, though, they are likely to try to avoid any dispute getting out of control and risking a military confrontation, which both want to avoid because of the risk of nuclear war.

Therefore, their rivalry will likely continue to be expressed in terms of geopolitical and geoeconomic competition.

Socialist Anti-Imperialism

The new socialist movement must adopt a clear and principled anti-imperialist position against both the U.S. and China. We must oppose Trump’s nationalism and protectionism; it will only whip up anti-Asian racism domestically and divide workers in China and the U.S., who share common interests in a struggle against their bosses and their states.

We should also oppose the Chinese state. Beijing’s claims to be socialist are laughable; it is a capitalist dictatorship that exploits its working class; oppresses its Uighur Muslim minority, going so far as to throw a million of them in concentration camps; and competes as an imperialist power with the U.S. for dominance in the world market.

Instead of picking sides between the U.S. superpower and its ascendant Chinese rival, the new socialist movement should build on the precedent set by high tech workers who staged an international strike against Google and organized support for GitHub workers in China. In a globalized capitalist economy, such working-class solidarity is the only way to end inter-imperial rivalry and replace it with international socialism.