US - China trade is just part of the 'most important geopolitical conflict of our time'
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Is the U.S.-China trade war rooted in economics, or something far more ominous and long-lasting?
On its face, the escalating tariff battle that’s pitted the world’s two most powerful economies against one another are about fair trade. China accounts for the lion’s share of the U.S.’s yawning trade deficit, which widened in March to $50 billion.
However, a growing number of economists warn that the trade dispute is commingled with nettlesome geopolitical issues that make it difficult, if not impossible, to separate economics from the multiple fronts on which both the U.S. and China are at odds.
“It would be a mistake to deal with the trade war in isolation. Whether the U.S. likes it or not, the economic competition with China is a critical battlefield in a much larger geopolitical struggle for global primacy in the 21st century,” John Hannah, a senior counselor at Foundation for Defense of Democracies, a national security and foreign policy think tank, told Yahoo Finance this week.
Consider the lengthy list of Sino-American pain points: the fight to block Huawei’s technology worldwide; Territorial disputes in the South China Sea that have become a proxy for global military supremacy; China’s (unsuccessful) role in containing North Korea’s nuclear ambitions; and Beijing’s controversial $900 billion Silk Road Initiative.
Taken together, those festering flashpoints will make it hard for both warring parties to lay down their swords on trade, as the U.S. and China jockey for position in other areas.
While Wall Street still expects a trade accord at some point this year, “tensions between the two countries are broadening out to include economic, military and ideological dimensions,” said Thomas E. Donilon, chairman of the BlackRock Investment Institute and former National Security Advisor to President Barack Obama.
“We see these tensions as structural and long-lasting,” Donilon added, in a recent analysis of geopolitical risks to BlackRock clients.
For those reasons, negotiations may drag on for far longer than markets currently expect, and may not be resolved to investors’ satisfaction, some argue.
“It’s long past time for Washington to fight back against a Chinese economic juggernaut built on theft, espionage, coercion, and massive state subsidies,” Hannah added.
‘Most important geopolitical conflict of our time’
Less than a month after the U.S. fired the latest salvo — a tariff hike on $200 billion worth of Chinese goods — economists are warning about the global spillover. Equity markets are in turmoil, and the stock prices of U.S. multinationals have swooned as tensions escalate.