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Why trade is a red herring in rising China-US tensions

By XN Iraki | May 21st 2019 at 00:00:00 GMT +0300

A Chinese employee works on manufacturing products that will be exported to the US at a factory in Binzhou in China's eastern Shandong province on May 17. The US has blocked Huawei from the US market and banned the export of US technology and materials to the company. [AFP]

China was in the crosshairs of President Trump’s administration right from his election campaign.

He kept reminding Americans how China had killed their jobs through manipulation of the currency, low environmental standards and stealing of intellectual property - ideas protected by law through patents, copyrights or just secrets.

Like other Republican presidents, Trump is willing to project American power abroad.

He seems hell-bent on implementing his campaign manifesto from imposing tariffs on Chinese goods to building a wall to stop illegal immigrants from crossing from Mexico and beyond.

His other target has been North Korea whose nuclear ambition he hopes to stop once and for all.

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Despite the historical meeting with North Korean leader Kim Jong-un, Trump seems not to have made much progress on that front, with Kim still sabre-rattling by testing missiles.

Iran has been his other target. Just like North Korea, nuclear weapons are at the heart of exchanges between Iran and the US. Once Trump was elected, he withdrew from an Obama era treaty that was supposed to stop Iran from developing nuclear weapons. American allies in Europe support the earlier deal.

The Iran-US grudges are deeper than nuclear weapons. Remember the US hostages in Iran after a revolution in 1979? They were only released after another Republican Ronald Reagan became the president.

America is angry with Iran for another less publicised reason. Together with Russia, Iran helped turn the tide of civil war in Syria in favour of Bashir Assad, the current president.

Iran has proxies in the Middle East beyond Syria. It is suspected to be propping up Hezbollah in Lebanon and Houthi rebels in Yemen. Iran seems determined to curtail American influence in the Middle East.

Despite sending warships to the Middle East, the US is unlikely to attack Iran as it did Iraq in 1990.

The instability in oil supply would have a ripple effect across the globe.

Furthermore, the US is withdrawing its military from Afghanistan and Syria. It will not attack North Korea or Venezuela too. Some suggest this could be because of China’s or Russia’s invisible hands.

Some observers suggest the explosion of American interest in these countries has the 2020 presidential polls in mind.

Republicans must project themselves as tough which feeds into American pride and also wins votes.

Tariffs can be vote winners, particularly if Trump can demonstrate jobs have been created at home. That strategy seems to be working, with the country now having the lowest unemployment rates since 1969.

On this account and lack of a democratic front runner, expect Trump to get another term. Yet, others suggest an obsession with these so-called rogue nations is a clever strategy to distract Americans from the Muller report which focused on possible Russian interference in the US elections.

Economic warfare

The weapon of choice against these regimes is economics, the use of sanctions or tariffs. Sanctions involve stopping other countries from trading with you or instituting financial transaction restrictions which slow down the economy.

Tariffs are extra taxes on goods and services which make them unattractive and have the same effect as sanctions but less severe.

The US also imposed sanctions on Russia after its annexation of Crimea in 2014. Tariffs make domestic products and services cheaper but protect inefficient industries.

The choice of approaches in “economic warfare” very much depends on the country and America’s strategic interests and the effectiveness of the approach.

For small economies like North Korea, Iran and Venezuela, sanctions would work because they are easy to monitor, and they would not affect the US economy significantly.

For China, the best approach is tariffs. The US needs the Chinese market and sanctions would be almost impossible to monitor and enforce. American firms have invested heavily in China since Deng Xiaoping opened the country in 1978.

Beyond trade

Tariffs on Chinese goods might be more than unfair trade; they might reflect America’s fear that China is challenging its dominance in geo-economics and politics.

Remember the One Belt, One Road Initiative for which Kenya’s Standard Gauge Railway is part of?

Remember the US is trying to stop others from dealing with Huawei, a leader in 5G? And now the declaration of emergency to protect USA computer networks. This declaration leaves no doubt that the spat between the US and China goes beyond trade.

China is on the rise, and we are, therefore, unlikely to hear the last of the current spat. After all, economic leverage, not military hardware is the new weapon in geopolitics and geo-economics.

Where is Kenya in all this? We seem determined to benefit from both global powers, with China building our physical infrastructure like highways while America long built our intellectual and cultural infrastructure.

It is still cool to visit the US and talk about it. Noted the heavy traffic going to the US for graduations this summer? Ever heard of such entourages to China?

The writer teaches at the University of Nairobi

Trade wars US-China trade wars China Donald Trump
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