'New Cold War': Trade war puts China-US ties at risk

There is a grim realisation among China's leaders that a full blown trade war with the US is now about to become a reality.

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    The trade dispute is a symptom of wider friction between the world's two leading economies [Mark Schiefelbein/AP]
    The trade dispute is a symptom of wider friction between the world's two leading economies [Mark Schiefelbein/AP]

    Beijing, China - They have been dismantling the old US Embassy in Beijing. Its diplomats moved to a vast complex on the other side of the city years ago.

    But this week - of all weeks - Chinese workmen finally began tearing down the old building. It is happening brick by brick and seems like a fitting metaphor for the state of Sino-US ties.

    Whatever the outcome of the 11th round of trade talks in Washington, the relationship is bad and it's going to stay bad for a long time.

    The dispute is a symptom of wider friction between the world's two leading economies: Taiwan, the South China Sea, Huawei, Iran ... honestly, the list is endless.

    It's a new Cold War with trade at its core.

    Only this week, the United States barred China Mobile - the country's largest mobile provider -  over espionage concerns - the same reason it gave for blocking Huawei, another Chinese telecommunications giant.

    Chinese investment

    More staggering, perhaps, is the steep drop in Chinese investment to the US - down more than 90 percent since the tariff war began more than 10 months ago.

    It's been hard to gauge the impact of it all on Chinese consumers. In Beijing's busy Dahuangzhuang market this week, most shoppers shrugged their shoulders when asked how the dispute was affecting them.

    But what has changed for some is the way they think about the US.

    "It is the Americans' usual practice to bully others. The hegemonist countries always do this," said one man.

    Another was more forthright: "The government is being very weak now. But I think it is a deliberate strategy that we make concessions for future economic development. When we get strong enough, though, America should not even think about bombing us."

    The bombing he's referring to happened 20 years ago this week when US missiles struck China's embassy in Belgrade during NATO's bombardment of the former Yugoslavia.

    Three Chinese journalists were killed. NATO called it an accident. China called it an act of war - and still does.

    This is a year filled with political and emotionally charged anniversaries in China.

    The most important one falls on October 1 - when it will be 70 years since the founding of the People's Republic. So this is a year when President Xi Jinping has to appear strong, especially over trade.

    Critical year

    For President Xi, the trade war is just one more concern in a critical year, says analyst Dan Wang of the Economist Intelligence Unit.

    "The economic expectation is that the economy is going to be very weak. There are financial risks arising and the housing market is not particularly strong either. So what we are looking at is fragile economy and a very difficult situation from the outside," he said.

    This could be why China suddenly appeared to harden its negotiating stance in the days leading up to the latest round of talks.

    Analysts say President Xi felt his negotiators, led by Vice Premier Liu He, had simply conceded too much in the previous rounds.

    He reportedly said: "I will be responsible for the consequences."

    Since these talks began, the exact details of what has been discussed have never been officially divulged.

    So we don't know for sure where there has actually been progress. Media reports have been largely based on speculation and unsourced officials "with knowledge of the discussions".

    Hopes and fears

    There could be a surprise breakthrough on Friday, but the likelihood is that these talks will drag on.

    If the negotiations continue, then that could just be enough to stabilise China's jittery stock markets, which this week suffered their worst falls in more than three years. If not, it could turn ugly again for investors.

    This, remember, was supposed to be the week when champagne corks popped as US and Chinese officials signed their elusive trade deal.

    But on Sunday night, President Donald Trump detonated an art-of-the-deal hand grenade, just as he did over North Korea in Hanoi in February.

    He tweeted the talks were, in fact, going too slowly, vowing to more than double tariffs on $200bn worth of Chinese goods.

    By Friday morning, there was a grim realisation among China's leaders that a full-blown trade war with the US was now about to become a reality.

    SOURCE: Al Jazeera News


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