Since the end of the Second World War, the US has sought to maintain total dominance of world affairs by projecting Pax Americana through freedom, soft power (Hollywood, among others), and economic might. Attempts by countries to displace them by espousing a different ideology like communism (Russia) or climb to the apex of capitalism (Japan) were resisted and crushed by the dissolution of the USSR and the signing of the Plaza Accord by USA, UK, France, Germany and Japan
China is the new adversary, a different one to what the US is used to. Trump might be spearheading the US-China trade war, but make no mistake about it, containing China is an official US State Department policy. Trump is only being cranky and loud about it – like he is with every other thing.
Causes of the trade war
The root cause of the trade war is ideological differences. The Chinese run a strange mix of communism and capitalism that keeps Western companies out of their Telecommunication, Finance and Auto sectors; dilutes maximum foreign ownership of companies to 50%; and subsidizes state-backed companies to compete unfairly with foreign firms. They run a close economy while foraging for the best deals overseas in sectors they won’t let foreign firms into back home
The rapid economic rise of the Chinese state for the past few decades has fueled Communist ambitions to make China the dominant global power by 2050. These led to 2 new bold initiatives that would have been unthought of decades ago – Made In China 2025 and the Belt and Road Initiative (BRI).
With the MIC 2025 – derived from the Germany’s Industry 4.0 blueprint, China is aiming for self-sufficiency in 10 key technologies:
- Next-generation information technology
- High-end numerical control machinery and robotics
- Aerospace and aviation equipment
- Maritime engineering equipment and high-tech maritime vessel manufacturing
- Advanced rail equipment
- Energy-saving and new energy vehicles
- Electrical equipment
- New materials
- Biomedicine and high-performance medical devices
- Agricultural machinery and equipment
It is also looking to displace Western firms from critical global supply chains.
With the BRI the Chinese intend to leave their socio-economic and military footprints in Eurasia and Africa, through what some Western voices have labeled as economic neo-colonialism though African Intellectuals like Onye Nkuzi argue that debt-ridden infrastructure is better than no infrastructure in a continent where the infrastructure required to jump-start the economy is minimal or absent.
American overconsumption (often overlooked) is also at the root of the trade war. The US practices unbridled consumerism spurred by debt. When Trump took office in January 2017, the net domestic saving rate was just 3%. The American President went on to announce enormous tax cuts to jump-start the economy, spiraling the fiscal deficit to record highs of 110% of GDP, which has triggered consumerism that has left America in a $419 Billion trade deficit with their Chinese counterparts. Reducing the trade deficit is a critical component of trade negotiation.
How the war has fared so far
The lingering trade war has sparked fears of a sustained global slowdown with the IMF Chief, Christine Lagarde, calling on both sides to sheathe their swords in the interest of global prosperity.
Both sides have fought the war with various tools – most popular of which have been tariffs and export restrictions. With a $419 billion deficit in favor of China, tariffs leave the Chinese with the shorter end of the stick. The US also has the edge on export restrictions on advance technologies, chips, and semi-conductors. Huawei recently announced an expected $30 Billion cut in revenue over the next three years due to the suspended axing of the Telecoms giant by the US Treasury Department.
In retaliation, China has threatened to impose import restrictions on rare earth metals to the US, a threat that has been more bark than bite.
“When governments permit counterfeiting or copying of American products, it is stealing our future, and it is no longer free trade” – Ronald Reagan after the plaza accord was signed in 1985.
State Department Policy Planning Director Kiron Skinner stoked racial tensions when she commented that Chinese trade dispute represents a unique “long-term threat,” which is “a fight with a really different civilization that is not Caucasian.” Fears of racial tensions escalating heightened with Malaysian PM Mahathir backing Huawei in a stinging rebuke of US – China policy. It might be argued that the US took on Japan and won in a similar trade dispute but the truth remains that the Japanese had to capitulate to US demands because Tokyo is dependent on Washington for security.
The real Chinese threat
Throughout the history of civilizations, nations rise and fall, so watching Pax Americana fall by the wayside is a matter of time but watching China grow into that position is inimical to the present global order and here is why: China runs an opaque command economy where the rule of law is subjective to national security and interest as defined by Beijing. Free Press is non-existent, and the Communist party narrative is the official narrative. Since the Tiananmen Square massacre, the Chinese Government has preemtively been in control of the news available in public domain.
While previous Uighur terrorist attacks were vile, the Chinese attempt to wipe out their Islamic faith and assimilate Muslims Uighurs into Chinese Agnosticism through mass incaceratons and brainwashing designated as thought transformation camps is condemnable by all standards. If the Chinese ascend to dominance aided by Big Data and AI to make better decisions in real-time compared to their Democratic counterparts, it will signal the end of inclusion and freedom (even if the US only pays lip service to these principles) especially in Africa where larger than life Despots still hold sway.
China has risen meteorically from being a cheap workshop for the West to be the World’s 2nd largest economy. With the MIC2025 initiative and the BRI, it is evident that the Chinese are no longer comfortable with being 2nd like Jafar in Alladin, and Trump isn’t the kind of guy to let it happen on his watch. Trump might fool the global markets into risk-off sentiments with tweets of an extended meeting with Xi at the G-20 summit, but the American endgame is to:
- Shift American overseas production to other countries like Taiwan, Vietnam, South Korea, Mexico, Philippines, Malaysia and even back home to deplete China’s financial muscle
- Disorganize and defeat Huawei in the 5G race like they did to the USSR in the space race.
- Ultimately maintain global dominance as the sole superpower for as long as possible.
How can Africa benefit?
The trade war presents an unprecedented opportunity to Africa. As a response to the BRI in Africa, the USA has launched a new scheme – DFC – to bridge the African inftrastructure deficit. The DFC is designated as a private sector driven intervention fund as opposed to the BRI which is State driven.
The trade war signifies a new scramble for Africa. African leaders should be skeptical of intention on both sides. The is no altruism in Capitalism (the Chinese are Capitalists too, don’t even daydream otherwise). The scramble is a chance for African leaders to (re)negotiate better deals with multiple choices as a buffer if they have learnt any lessons so far.