The stock markets have found a new wind on the back of President Trump’s trade truce with Chinese President Xi Jinping. That truce was agreed to last weekend at the G-20 summit in Argentina. But if you care about America’s future prosperity and a rules-based international order that favors fair play via established rules, you better hope the truce doesn’t last.
Because if it lasts it will mean only one thing: China is playing the U.S. for a fool.
Don’t get me wrong, it is possible and preferable that the U.S. and China can agree to a durable balance of power in the future, a balance that allows both nations to prosper and to influence international relations in each nation’s respective favor — but only if that balance is built on honest clarity. That time has not yet come, nor will it come for years.
At present, China has little reason to believe that it must compromise in ways more favorable to the U.S. But China has every interest in continuing to steal U.S. intellectual property, alter the rules of international order, and unjustly benefit its own economic interests above all others. China has every interest in doing these things because doing so is necessary for Xi Jinping to achieve his long-term interests. Those objectives are China’s global economic hegemony and China’s security dominance of the Indo-Pacific and Central Asia, within the next 10-20 years.
Yet as long as the U.S. can economically and militarily constrain China, Xi will struggle to achieve his interests. In turn, the Chinese leader must narrow that power gap with urgency. That means economic growth of a scale that necessarily requires China to find shortcuts around its own technology and skills weaknesses. Hence why China is so capricious in breaching World Trade Organization rules, and in thieving and absorbing U.S. intellectual property. But the simple point is this: To play fairly with the U.S., Xi would lack the growth and power to reach his objectives.
That takes us back to last weekend’s truce. If this truce turns out to be anything more than short-term breathing space, it will signify that China has bought Trump’s appeasement with a few carrots of added trade. And you can bet that China will make very good use of that appeasement, exploiting Trump’s grant of political space to continue its big-ticket unfair practices; most notably, stealing intellectual property.
The same is true of international political order. If China is happy with an American truce, that happiness will also necessarily mean that China is free to continue dominating the Indo-Pacific — a dominating imperialist effort a la 1930s Japan, just on a more calculating and greater scale. I get that the American interests at stake here are less obvious than with narrow economics. Still, they are real.
After all, we should care about preserving the right of friendly states to pursue their own interests free of intimidation. We should care about what it will mean for the price of low-cost goods that Americans rely upon (which flow through the South China Sea), if China gets to set those prices. We should also care about American businesses only being able to enter international markets far beyond Chinese territory on Chinese terms.
As I say, a U.S.-China truce is both preferable and possible. But only when China recognizes that the U.S. is unwilling to give up our rules-based international order and our economic prosperity. And that won’t happen for a while yet. This is a new cold war.