When I’ve followed the news and discussion around the ‘trade war’ between the US and China, and also between the US and Mexico I’ve noticed that some economic commentators fundamentally misunderstand how international politics works. Specifically they said that there will be a deal between the US and China as trade on aggregate makes everyone better off and so both sides have a great deal to lose by not reaching a deal. In this blog post I want to explain why trade relations between China and the US will remain poor and the logic behind the worsening of relations between the economic great powers.
The argument presented is sound, it’s true that both sides have a lot to lose by not reaching a deal, the problem with it is that it doesn’t consider that international relations is always and everywhere a zero-sum game. What does that mean? It means that if someone loses it necessarily means that someone else wins and vice versa, so in a zero-sum game taking an action which hurts you is always worth it if it hurts your opponent more than it hurt you. Which is exactly the US’ strategy in the trade war. It might seem that initiating a trade war was a negotiation strategy to get a better deal, but I think it’s really a way for the US to make China weaker.
When starting a conflict, be it military or otherwise, the aggressor always believes that they can win or at least that it can gain something from the conflict, and this is also the case of the current trade war. Individuals are sometimes irrational but states are not as they are made up of such a larger number of individuals to negate any irrationalities, and therefore because the US decided to initiate the trade war it must have thought that it would gain from it vis-à-vis China. The conflict will end the day the US no longer sees China as a great power rival and given the time scales on which states operate that could be decades from now. In other words, this is not a temporary thing to get leverage in coming trade negotiations, expect China and the US to get more and more adversarial as China’s rise continues and expect things to get more tense in east Asia.
To paraphrase Thucydides, it was the rise of China and the fear that this instilled in the hearts of Americans which made war inevitable. We should be grateful that it is, at least for now, only a trade war.
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Written by Karl Johansson, founder of Ipoleco
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