FIVE REASONS CHINA ISN’T BACKING DOWN

FIVE REASONS CHINA ISN’T BACKING DOWN

This week, the US-China trade war escalated dramatically. The Trump administration announced 10 percent tariffs on $200 billion in Chinese exports, which will jump to 25 percent in January unless China offers concessions. China countered with tariffs ranging from 5-10 percent on $60 billion in US products that may likewise rise to 25 percent. President Trump then shot back with a threat of tariffs on yet another $267 billion in Chinese exports.


This increasingly dangerous fight is headed into 2019. Further escalation is very likely, in part because China isn’t ready to quit.

Here are five reasons why:

  1. China’s leaders long suspected that Barack Obama’s “pivot to Asia,” a plan to shift US attention and resources into China’s neighborhood, was intended mainly to contain the expansion of China’s influence. Trump’s trade war, and statements from US officials that China’s economy is hurting as a consequence, confirms this suspicion. If the US means to stunt China’s natural growth, they reason, then the trade war isn’t really about fairness. It’s about undermining China’s ability to develop a competitive, high-tech economy and the extension of its global influence. Given that, it’s imperative, they believe, not to back down.

 

  1. Trump’s actions this week make clear that trade talks are pointless, at least until after US midterm elections on November 6. At that point, it’s unlikely so many complex issues could be resolved in the remaining eight weeks of 2018, even if the US and China wanted to cooperate. So unless they find new reasons to become more conciliatory, both sides’ tariffs will rise from 10 to 25 percent on January 1. That escalation will add accelerant to the fire, and as 2019 opens, there will be no obvious opportunity for China to propose a compromise. Better to wait until tariffs begin to hit the US economy, the Chinese may reason, and Trump is better disposed to cut a deal.

 

  1. Over the past year, Xi Jinping has consolidated more power within China than any leader in decades, in part on promises to deliver on what he calls the “China Dream.” With power comes credit and blame. This battle with Trump is now Xi’s fight. His credibility, with the Chinese leadership and the public, is on the line. Combine this with the reality that Trump launched this war, and Xi can’t afford to back down without concessions from Trump.

 

  1. China’s economy is far from crisis. According to Capital Economics, a research firm, “The damage from the latest escalation of the trade conflict on China’s economy will be small—much less than 0.5 percent of GDP, even if policy is not loosened further.” If Beijing wants to pump money into the economy to boost growth, it can. It can also allow the value of its currency to drift lower to boost exports. Chinese officials say that’s not in their plans, but it’s a tool they can use if they need to. China can also redirect many exports away from the US toward other customers.

 

  1. Chinese officials believe that, even if China has greater long-term economic vulnerability than the US, Trump has greater near-term political vulnerability than Xi. China’s president has no congressional majorities at stake this fall and no re-election campaign to prepare. There’s no Robert Mueller to keep him awake and no powerful business lobby ready to go public with its concerns. Unlike Trump, he pays no direct political cost when farmers and industries must be bailed out. In sum, Xi Jinping has reason to believe that China’s authoritarian political system and state-dominated capitalism are better at absorbing economic shocks than a democracy is.

 

The bottom line: US-China trade conflict can inflict real long-term pain on the Chinese economy—as well as the US and other countries. But because both Trump and Xi believe near-term fallout can be managed, this trade war will probably last longer and inflict more damage that anyone in either government really wants.

This time last year, world health experts were speculating about why Africa appeared to have escaped the worst of the global pandemic. Younger populations? Natural immunity created by exposure to past viruses? Something else?

They can stop wondering. Africa is now in the grip of a COVID emergency.

More Show less

Get insights on the latest news in US politics from Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington:

House Speaker Nancy Pelosi barred two Republican members from serving on the Jan. 6 commission. What's going on?

Well, the Jan. 6 commission was designed to be a bipartisan commission, taking input from members from Democrats and Republicans. House Minority Leader Kevin McCarthy had the opportunity to make recommendations but the Speaker of the House, Nancy Pelosi, could always veto those recommendations. In this case, she did, saying no to two members, Jim Banks and Jim Jordan, both of whom are strongly aligned with President Trump and who voted against certifying the election results in 2020. The Republicans for the most part see the Jan. 6 commission as an opportunity to score political points against them, and the Democrats say this is going to be a fair, non-biased, and nonpartisan investigation into what happened on Jan. 6, starting with a hearing next week with some of the police officers who were involved in the battle with the protesters inside the Capitol.

More Show less

In his New York Times op-ed, David Brooks says the US is facing an identity crisis — protecting liberal and progressive values at home while doing little to stop autocrats elsewhere. But has the US really abandoned its values abroad just because it's withdrawing from Afghanistan? Ian Bremmer and Eurasia Group analyst Charles Dunst take out the Red Pen to argue that the US can advance democracy without being the world's sheriff.

More Show less

When the Tokyo Olympics begin on Friday, Japan watchers will be following more than just the performance of Japan's star athletes, including tennis star Naomi Osaka. They will also be tracking the political fortunes of Prime Minister Yoshihide Suga, who is taking a big gamble by staging the event — amid a raging pandemic — in the face of strong and longstanding opposition from the Japanese public. What are the stakes for Suga, particularly with elections on the horizon? Eurasia Group senior analyst Ali Wyne explains.

More Show less

YouTube pulls Bolsonaro's rants: Google-owned YouTube pulled down a series of videos on the channel of Brazil's populist President Jair Bolsonaro, accusing him of spreading misinformation about the pandemic. YouTube removed more than a dozen clips for touting quack cures for coronavirus or claiming, in defiance of scientific experts, that masks don't reduce COVID transmissions. Last year, Twitter and Facebook also removed some content from Bolsonaro's feeds for similar reasons. But critics say that YouTube's move is too little too late, because Bolsonaro has been spreading misinformation about COVID since the pandemic began. Many Brazilians hold him personally responsible for the country's abysmal pandemic response, which has led to almost 550,000 deaths, the second worst toll in the world. Will YouTube's move change Bolsonaro's message? His weekly address to the nation, where he converses not only with government ministers but also various conspiracy theorists and loons, is broadcast on YouTube. Surely he doesn't want to risk losing that — or does he?

More Show less

Boycotts! Bans! Protests! Drugs! Think you've got gold medal knowledge about politics at the Olympics? Test what you know with this special Tokyo Olympics Quiz. And to stay current on all the latest political stories at the Games and around the world, subscribe here to Signal, our daily newsletter. Now, without further ado, the first question is...

More Show less

28: The UK and the EU have again failed to agree on post-Brexit trade rules for Northern Ireland, which is part of the United Kingdom. In a 28-page document, the British government had suggested further changes to trade rules that were already negotiated as part of the Brexit settlement, but Brussels was not having any of it.

More Show less

Subscribe to GZERO Media's newsletter, Signal

GZERO World with Ian Bremmer. Watch episodes now

GZEROMEDIA

Subscribe to GZERO Media's newsletter: Signal

GZERO World with Ian Bremmer. Watch episodes now

GZEROMEDIA

Subscribe to GZERO Media's newsletter: Signal