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US-China Relations: A New Cold War

During the Trump presidency, the US cemented a new stance on their policy on China. They went from engagement, economically cooperating with China, to trying to contain growth. This was seen with the trade war. China is also seen as having more aggressive foreign policies. The new stance from Washington towards Beijing conveys the worsening diplomatic relations between the two. Economic containment could also signify a wider attempt to contain Chinese growth of power in a national security viewpoint. In this essay, I will argue why recent US policies do show a clear return to great-power strategic policy making, but the situation, whilst being of grave significance, doesn’t necessarily mirror the Cold War in concept.


The rapid economic growth in China has led to fears in the USA of a new hegemon and peer-competitor to the US arising. China’s growth economically is likely going to result in China’s ability to grow a powerful military. This is because in a realist viewpoint survival is the priority in an anarchic, self-help system, therefore it is vital to have a strong military. Military strength is often built upon larger populations and wealth, therefore it is quite probable that at this rate, China will be able to challenge the USA's military dominance. Therefore, economic competition will likely be followed(or already has started to be) by a fierce security competition. Historically, it’s arguable that there is a threat of a major conflict if the US falls into the Thucydides' trap (Allison, 2018). This is when an existing hegemon is threatened by the rise of a new power and competitor and this inadvertently leads to a major war. This is a theory which is used by some to explain many major wars in the past, including the First World War.


This topic is important to study because these are the two largest economies and the two largest spenders on military. Therefore, any confrontation between these powers will have severe consequences for each other and states around the world. Due to globalisation, the world is now interdependent in what has been modelled as the cobweb model (Keohane and Nye, 1972, 1977). This idea claims that the world is interlinked through economic, cultural and political links. Both sides have many stakeholders on either side through multinational companies, who have global supply chains, and workers who are employed globally by these MNCs. Therefore any confrontation, even in an economic sense, will lead to global problems.


Since the 1970s, when President Nixon recognized the People’s Republic of China of mainland China to be the state’s legitimate leaders, over the exiled nationalist government based in Taiwan, it is considered that US engagement with China has led considerably to China’s rapid growth and development. After the split between the ideologically like-minded states of the USSR and China in the 1960s, America opportunistically saw strengthening diplomatic relations with China significant to try and contain the USSR in the Cold War. Known as realpolitik, this is a pragmatic approach based on making decisions due to present circumstances over inflexibility due to ideological differences. Following the end of the Cold War, the US maintained these relations with China, although it wasn’t needed in a wider great-power struggle. Keeping a “most favoured nation” economic status throughout the 1980s and 1990s, Americans believed that it would lead to the democratisation of China, in line with the belief of Francis Fukuyama(1992) that there would be no more opposing ideologies to liberal democracy. However, this was proved wrong and a result of the euphoria of the end of the Cold War. Following China’s introduction to the World Trade Organisation in 2001, after a strong lobby from the USA, China became the world’s factory, with a lot of production world wide taking place in China as well as high-tech capital flowing into the country. This has helped China’s explosive economic growth, becoming the second largest economy in the world. Its interdependence globally now makes it difficult to curb its economic growth. Realists would argue that the liberal belief that China wouldn’t look to become as powerful as possible, as the US has become, was delusional. Furthermore, China has stayed authoritarian. Mearsheimer argues that the US’ role in China’s economic growth fostered the rise of what would become the US’ greatest competitor. China’s ascendancy to a potential regional hegemon has created an ‘inevitable rivalry’ (Mearsheimer, 2021). Mearsheimer believed there would likely be escalating tensions between the two sides, eventually, leading to some sort of confrontation as both sides will go to tremendous lengths to achieve their objectives.


However, a reason why hostilities may ease is due to the costs to the many stakeholders on both sides. Interdependence between the two sides has meant that the US and China have a mutually beneficial relationship to some extent. China still depends on the global economy for energy sources and is still developing, therefore it is arguably in their interest to cooperate with the US. Both sides invest into the other, mutually creating more jobs. Environmental interdependence also makes it vital for these two industrial states to try and co-operate on the collective dilemma of climate change, which poses existential threats to both countries in the long-run. The mutual costs from increasing tensions may encourage détente. However, there are suggestions from Presidents Trump and Biden on decoupling the economies, meaning that they see some importance in reducing their dependence on China (Frontline PBS: Trump's Trade War, 2019).


Following China’s induction into the WTO, their GDP growth has increased ninefold (Nikkei, 2021). Many argue that China’s rise in trade has been positive-sum as it has been able to produce cheaper goods for people around the world. This led to a lot of foreign companies, including American ones, to invest in China in order to produce goods from there. Cheaper production costs meant more trade with China boosted the annual purchasing power of the average U.S. household by $1,500 between 2000-2007 (CFR, 2021). China has benefited tremendously from trading globally as its population has transitioned from having 90% of people in extreme poverty in 1978 to less than 1% now (Allison, 2018).


However, there have been contentious issues over the trade partnership between China and the rest of the world, which many US politicians haven’t felt were dealt with by the WTO. Firstly, with an increase of imports from China, there has been a loss of demand for domestic manufacturing jobs in the US, leading to significant unemployment in the sector. Furthermore, there was a more structural issue within the Chinese economic model. Whilst entry into the WTO was meant to lead to liberalisation of markets in China, with market forces and the private sector taking over from state led production, as time has gone on, Chinese economic reform hasn’t happened as Washington wished, with subsidies still being used on a large scale which creates an uneven playing field in Chinese firms’ favour. There is also the more cynical issue of government-backed Chinese hackers stealing US intellectual property. Sceptics of the growth of Chinese firms in international markets believe that unjust government intervention will allow Chinese industries to dominate markets around the world.


President Trump vowed to confront China on what he believed were unfair practices that were hurting US consumers and producers. Whilst in power, he took a unilateral approach to dealing with the trade issues with China. Aiming to rebalance their trade partnership, Trump bypassed the WTO by directly trying to coerce Beijing to concede to his terms. President Trump claimed several areas where the Chinese economy had to be reformed. He stated that America’s trade deficit to China needed to be reduced by $200 bn; Beijing needed to stop protectionist subsidies helping Chinese producers, giving them unfair international competitiveness; China had to stop stealing American intellectual property and that US exporters needed to have the same access and opportunities as domestic producers in China, as well as other demands. When Beijing refused these terms, Trump imposed tariffs on $100 billions of Chinese imports into the US. This was followed by retaliatory tariffs by China and this commenced the trade war.


Subsequent talks trying to resolve trade related issues have been unsuccessful, with a potential trade agreement in 2020 failing. The trade war has cost both sides. In the USA, a study has reported that around 300,000 jobs have been lost as a result of the trade war and that it has reduced US real GDP growth by 0.3% (Brookings, 2020). The cost of Chinese goods for US producers increased by as much as $80 billion due to Trump’s unilateral approach (Kucik and Menon, 2022). Furthermore, US exporters to China, such as farmers, experienced losses too as they were less competitive in Chinese markets due to tariffs. By 2019, the US's trade deficit to China had reduced slightly from pre-trade war levels, however, it was not close to the $200 billion which Trump had promised. The failure of Trump’s objectives could represent China being too large and too dynamic to be contained and that further strategies are unlikely to attract other countries in support (Bergsten, 2022).


However, the US’ trade policies seem to persist with efforts to contain. There is bipartisan consensus on China being a threat to the USA. Biden has notably been unchanged from the preceding administration’s policy towards China, keeping all Trump-era tariffs against China. This could indicate how economic competition between the two sides could likely remain in the long term rather than it being a small trade dispute, which aren’t uncommon. With costs to Americans, this persistence may symbolise US politicians’ scepticism of China, so trade is the current front for containment by the US. Trade disputes may be a major factor in increasing tensions and it could potentially escalate to further decoupling between both sides, which would deeply worsen relations. China sceptics promote this as China exports more to the US than the US exports to China, therefore, there would be a larger relative impact on the Chinese economy (Kucik and Menon, 2022). Decoupling is something that some realists promote in case, maybe due to a conflict over Taiwan, trading would cease and the reliance on Chinese goods for the US would cause significant disruptions.


What is more likely, I believe, is for a partial decoupling on certain critical areas. These may be areas where there is risk to national security. Trump’s banning of Huawei and access to the US’ 5G network, were due to fears of potential espionage. There may also be some restrictions on US exports of hi-tec, because these could be used for advancing Chinese weaponry or their own technology industry - an area which is likely to see intense competition in particular. This means more self-reliance, seen by the US’ Innovation and Competition Act, which is investing $250 billion funding research and expanding manufacturing in new technologies(Kucik and Menon, 2022). This limited competition may even be constructive, with an advance in technology from both sides, with some innovations being accessible to consumers worldwide. But in most other sectors of the economy, there may be little decoupling and a considerable amount of trade may continue. This is especially the case with non-state actors, such as multinational corporations, lobbying in China’s favour to try and maintain supply chains running between the two countries(Politico, 2021). This is a stark contrast with the Cold War, where there wasn’t a significant US-USSR trade relationship. But if both countries somehow were to be involved in a conflict against each other, these factors would likely be insignificant and at the President’s discretion, all trade would have to stop. Whilst China has challenged the USA on economic power in terms of their capacity of resources, America may still have the advantage when it comes to each respective state’s global influence.


America is the only country in the world to be able to sustain military interventions in more than one conflict at a time and it is the only country to be able to intervene anywhere in the world. This is because the USA has over 700 military bases in over 100 countries around the world. Contrastingly, China only has one overseas military base. China is beginning to cement their presence globally through projects like the Belt and Road Initiative(BRI). China has the potential to expand its military presence in order to truly become a Superpower, for example by creating naval bases in ports such as in Hambantota, Sri Lanka, where it has gained control over as a debt repayment, but critics argue that they would not be fully welcomed and accepted, whereas the US’s strong cultural image, as well as its attraction as a trustworthy defensive addition to a state, has allowed them to be accepted in many different countries(Rachman, 2021). The USA has a lot of soft power and cultural links worldwide as a result of industries like Hollywood, from which films are seen everywhere. China on the other hand, for now, does not have as many global cultural brands at such a scale. It would be interesting to see whether the BRI would lead to more support for China and its soft power, but the issue of debt traps make China seem more opportunistic than altruistic.


The US’ global military presence is also as a result of decades long symbiotic relationships with states and many trusting the US to go through with its duties to protect them if necessary. This can be exemplified by the US’ commitment to defend all 29 NATO member states as well as other states with bilateral agreements. The US has a strong presence in the Pacific through strong bilateral partnerships with allies like Japan, South Korea and Australia, all under America’s nuclear umbrella. There are around 200 bases just in these countries (Aljazeera, 2021). These have been strengthened recently including major deals such as the AUKUS partnership. China on the other hand doesn’t have such deep ties with countries around the world where states are dependent on China for security means. The US’s military dominance is also emphasised by their significantly larger military spending. In 2020, the US’ military budget towered over China’s as it spent $766.6 billion compared to $244.9 billion (Statistica, 2021). This is a reflection of the US’ gross domestic product being larger than China’s for now, however, as China’s economy grows we could see near similar military budgets in the future.


The difference in the capacity and international reach of the respective militaries contrasts the military context of the Cold War as both sides had so much destructive power that they were quite evenly matched. Furthermore, power in the world was balanced into two sides, led by the superpowers, and so both the US and the Soviet Union had major global influence and international military presence as they had to assist allies or be involved in proxy wars; tensions began with established spheres of influence in the surrounding areas of the superpowers. Whilst the USA arguably leads a Western sphere of influence, China doesn't hold enough influence in surrounding states, the US actually does. Even with deep economic ties with South Korea, Chinese wishes to bar a US missile defence system were ignored from Seoul. This showed the attractiveness of US military dominance over Chinese threats and Beijing’s lack of control of its surroundings (Rachman,2021). Therefore, whilst Superpower status is a subjective concept, I believe that only the US is still a true global Superpower with significant influence in all corners of the world. However, Chinese economic growth will likely lead to higher military spending as well, therefore, China is a major rising power.


Whilst my section above showed the asymmetry in power in favour of the US, a theory which I introduced earlier could make this situation more dangerous. Whilst the US may still be the more powerful state, power transitioning to China may lead to the Thucydides Trap, leading to a major war between an established hegemon and its rising peer-competitor. It is a trap because often, the cause for the war isn’t through direct provocation, but through the knock-on effects of third parties dragging the powers into an undesired clash. In many ways, some differences between the Cold War and this situation may not prevent the likelihood of intense competition on a large scope of areas but it may make a real conflict more likely, centred around the Pacific. The risks of nuclear war, where both sides would be damaged beyond repair, makes any conflict incredibly grave and irrational. During the Cold War, the world being split into two camps made the actions of each much more calculated and the risks were well known due to the obvious consequences from nuclear deterrence. Due to a more multi-polar model, there’s more instability, with the possibility of different powers confronting others, as initially the risks aren’t as existential, possibly dragging other countries into a major war. China being surrounded by allies of America and states with territorial disputes is a reason why China may try and create a regional hegemony to push any hostile power out of the region. Mearsheimer(2001) had theorised this and that this process wouldn’t be peaceful. The biggest possibility is a clash between an independence-seeking, US-supported Taiwan and China.


Increasing tensions between the US and China over Taiwan can be seen as a return to great-power strategic policy, which ended after the Cold War. Since 1979, when official relations between the People’s Republic of China and the US started, America recognized the legitimate authority of China being in Beijing. Although the US offered certain assurances to Taiwan over potential military assistance if China militarily invaded, the US haven’t made much official diplomatic contact with them. However, in a change in attitude, Trump sold Taiwan $18 billion worth of arms and increased communications with the government, whilst also deepening their diplomatic presence in Taipei (Maizland, 2022). This was followed with Biden assuring certainty that the US will assist the island militarily if China were to reunify the island with force and then the US’ Speaker of the House of Representatives, Nancy Pelosi, visiting the island. If China were to take over Taiwan, it would be a very significant milestone for China establishing hegemony in the world’s most consequential region (Sacks, 2022). I believe that this shows the US clearly trying to shift its policy on Taiwan in order to try and contain China’s territorial gain, regional influence and to assure its allies, such as Japan and South Korea, that America is there to protect their collective interests against an ever more hostile China so that they gain confidence in resisting a growing China. Some of these issues may be considered zero-sum, therefore it will arguably lead to each side going to great lengths to achieve outcomes as the consequences for the winners and losers would be very impactful, creating an intense security competition. A conflict over Taiwan may or may not involve direct conflict between US and Chinese militaries, or it may be intended to be a conflict contained to just the island, but the nature of war is unpredictable and it is reasonable to believe in such a situation there may be rapid escalation without limit if both sides are involved in some form.


However, the globalised world which we now have could be seen as positive sum and it has been created through a web of interconnectedness. We now also face collective dilemmas, such as climate change, that desperately require cooperation. Therefore, conflict may be deterred due to economic and ecological interdependence. Furthermore, the use of financial sanctions, such as freezing foreign reserves, as done by the West against Russia, would have a significant impact on China as it’s the largest of foreign reserves and more than half of China’s massive foreign reserves are denominated in dollars(Wihtol, 2022). This will severely halt the Chinese economy. As a rising power, with a steadily growing economy and a dependence on global exports internationally, the costs of war are a lot greater, therefore it is rational for China to wait or find a peaceful solution for the reunification of Taiwan. Avoidance of such a conflict would eliminate the chance of a major war involving nuclear weapons.


Therefore, the risk which both sides face is clumsy policy dragging states into a war. Joseph Nye (2021) has described this process as ‘sleepwalking’ into a conflict, as he mirrors it to the chain of events and poor policies made in the buildup of WW1 dragged countries into a long, attritious war, rather than a short, contained one. The main risks, he believes, is rise in nationalism in China, which is being reflected in a very aggressive form of foreign policy (called wolf warrior diplomacy), and this conflicting against populist chauvinism in America. This can lead to inflexibility by either one or both sides leading to irrational escalation. Wars of words or analogies to the past, such as similarities with the ‘Cold War’ may shore up support domestically while souring ties internationally. If both sides were to act rationally, they would come to compromises or at least wouldn’t have hawkish stances on issues as this relationship can ultimately be a positive sum as discussed earlier.


Overall, I believe that recent changes in attitudes by the US do not just end at a trade dispute but it is a larger competition between an established hegemon and a rising challenger. There are also military policies strengthening the US’ stance to contain China. Therefore I believe that there is a clear return to great power strategic policy making in the sense that it is a complex security and economic competition with each side wanting more power. We’ve seen this through what, I believe, will become a refined decoupling appropriate for our globalised world, strengthening bilateral partnerships in the Pacific by the US and more significance placed on Taiwan. But I believe that there are a lot of differences with the Cold War as that was an ideological battle which involved almost the whole world being split into two camps and there was an understanding of what was allowed and what were red lines, so that conflict was unlikely. However, today, we face a more complicated picture, with two deeply intertwined powers yet security competition may be much more volatile. I wouldn’t call this a Cold War as I don’t believe that this relationship will lead to two decoupled powers competing attritiously for more power over a prolonged period of time in a worldwide struggle. I believe that there will be more security competition being centred around the Pacific, as China isn’t a global superpower. But knock-on effects would be felt globally because these are the two largest economies. The risk of inadvertent escalation and conflict is also disturbingly significant too. The result is less predictable, I believe, and will depend on whether each side decides to see this as a zero-sum or positive-sum game. This distinction will be crucial on whether each side sees to cooperate or attempt to coerce and the extent to which actions are rational.


References:

- Frontline PBS (2019) Trump's Trade War https://www.youtube.com/watch?v=4_xQ5JisFuo


- DW News (2019) USA vs China: The new cold war on the horizon https://www.youtube.com/watch?v=taAHtUDo18Q (Accessed 19 January 2022)


- BBC iPlayer (2019) China: A New World Order https://www.bbc.co.uk/iplayer/episode/m0008cc7/china-a-new-world-order-series-1-episode3


- Mearsheimer, J. (2021) The Inevitable Rivalry: America, China, and the Tragedy of Great-Power Politics https://www.foreignaffairs.com/articles/china/2021-10-19/inevitable-rivalry-cold-war?utm_medium=promo_email&utm_source=lo_flows&utm_campaign=registered_user_welcome&utm_t erm=email_1&utm_content=2022032


- Nye,J. (2017) The Kindleberger Trap https://www.belfercenter.org/publication/kindleberger-trap


- Brookings (2020) More pain than gain: How the US-China trade war hurt America https://www.brookings.edu/blog/order-from-chaos/2020/08/07/more-pain-than-gain-how-theus-china-trade-war-hurt-america/


- Rachman,G (2021) China is still a long way from being a superpower https://www.ft.com/content/bdaad457-9e22-4d74-b614-6cc44a613a0c


- Nikkei (2021) China's trade with world surges ninefold after 20 years in WTO https://asia.nikkei.com/Economy/China-s-trade-with-world-surges-ninefold-after-20-years-inWTO


- Statistica (2021) China Steps Up Military Spending https://www.statista.com/chart/16878/military-expenditure-by-the-us-china-and-russia/


- Kucik,J and Menon,R (2022) Can the United States Really Decouple From China? https://foreignpolicy.com/2022/01/11/us-china-economic-decoupling-trump-biden/


- Politico (2021) Corporate America fights uphill battle against anti-China push https://www.politico.com/news/2021/09/01/business-us-china-trade-508239


- Maizland, L (2022) Why China-Taiwan Relations are So Tense https://www.cfr.org/backgrounder/china-taiwan-relations-tension-us-policy-biden


- Sacks, D (2022) What Biden’s Big Shift on Taiwan Means https://www.cfr.org/blog/what-bidens-big-shift-taiwan-means


- Wihtol, R (2022) Ukraine War Will Force China to Reconsider its Taiwan Policy https://www.aspistrategist.org.au/ukraine-war-will-force-china-to-reconsider-its-taiwan-policy/


- Nye, J (2021) Is the US sleepwalking towards war with China? https://www.aspistrategist.org.au/is-the-us-sleepwalking-towards-war-with-china/


- Allison, G (2018) Is war between China and the US inevitable? | Graham Allison https://www.youtube.com/watch?v=XewnyUJgyA4


- Bergsten, F (2022) America and China — the defining relationship https://www.ft.com/content/1bb94349-a401-45ee-8501-7e428add40e8


- Aljazeera (2021) Infographic: US military presence around the world https://www.aljazeera.com/news/2021/9/10/infographic-us-military-presence-around-the-world-interactive