The US-China paradoxical war by other means

Your inactivity has done harm enough.

(Thucydides, History of the Peloponnesian war)

While Donald Trump is voicing both “Hawkish” and “Dovish” in post-victory interviews and podcasts, other nations, particularly China, are preparing to safeguard themselves against the approaching uncertainty, unpredictability and chaos over the global economy and polity. As Beijing openly challenges the preexisting global order, made possible by its sheer scale of economy, Trump would ensure to uphold his preferred management style of chaos and ambiguity in which he thrives.

From pledging to impose stringent tariffs on Chinese imports and vowing to block Beijing’s access to cutting edge technology to inviting Xi Jinping on his swearing in ceremony make attempts of political astrologers more arduous to divine Trump’s foreign policy. And some experts are already conceding whether Trump’s actions will be led by national interest or his own hidden commercial interests are unreadable.

From Brussels to Beijing and from friends to foes, every nation seems uneasy while looking through the bushy fog surrounding the Oval Office. Apprehensive of the coming trade war after Trump enters the White House coupled with weak economic growth in Eurozone, particularly in Germany,  ECB has slashed interest rates by quarter-point to 3 percent. And NATO’s European members are considering to increase their defense spending from 2 percent to 3 percent of GDP to comply with Trump’s old demand that Europe should pay more for its own defense, though seven EU member countries including Italy and Spain are still falling behind to meet the earlier benchmark of 2 percent. While commenting on the move, one of the German officials told The Financial Times that “a commitment to 3 percent would be a good signal to the US and Trump.”

Though Washington would probably dodge stretching the differences with its friends but with Beijing, case is different. China being the single greatest disruptive force in post-world war-II political, economic and security order and direct threat to the US world dominance, especially under Xi’s leadership, Trump vows to impose 60 percent tariffs on Chinese imports. Likewise, treating Beijing a strategic competitor the Biden administration has already tightened rules on advanced chip exports to China, restricted the US firms from selling advanced semiconductors and equipment to Chinese companies, put constrains on data flow, limited scholarly exchange and research collaboration between the two nations and has compelled other chip powerhouses, most notably Japan and the Netherlands, to restrict sales to China.

Beijing facing with the tremendous pressure from within and without is preparing its own “playbook” to deal with the situation in aggressive and original manner. By bringing the US artificial intelligence chip giant, Nvidia, under anti-trust investigation, establishing its dominance in many high-tech supply chains, slapping stringent controls on exports of critical minerals to the US, stopping companies to avoid buying American computer chips, and imposing sanctions on 13 American defense firms, Beijing is sending clear message that it will disrupt American supply chain if Trump administration launch a new trade war. Citing military application, Xi administration is also considering a proposal to ban export of gallium, germanium, antimony and super-hard material to the US which are inevitable in production of semiconductors, fiber optic cables and night vision goggles. And expressing displeasure over the Washington’s latest arms deal of $385 million with Taiwan Beijing has banned dozen American defense firms and executives from doing business in or traveling to China.

Along with a more expansive and assertive form of mercantilist techno-nationalism, Beijing has adopted murkiness as a key feature of its “unreliable entity list.”  As inclusion of Nvidia in ‘unreliable entity list’ came as a surprise when Beijing itself had cleared Nvidia deal with Mellanox Technologies in 2020. Gearing up to confront incoming Trump administration’s anticipated assertiveness in Trumpian style, Xi’s team is going without any time frame and explicit criteria of inclusion and exclusion of companies in ‘unreliable entity list.’ However, such uncertainties, argues The Wall Street Journal, make it more effective by giving Beijing wide latitude to exert pressure on the U.S.

Nevertheless, the restrictions imposed by the outgoing Biden administration and in anticipation of more assertiveness on part of the incoming Trump administration are pushing Beijing on the path of technological self-sufficiency.  It was not until after Washington began to flex its muscles that Beijing’s aim shifted towards indigenizing supply chain from beginning to end, writes Scott Kennedy in Foreign Affairs, particularly in strategic technologies such as semiconductors, telecom, and artificial intelligence. In a drive to “Delete A” (i-e. to remove American tech from their supply chain) China is investing heavily, over last five years, in the most advanced areas of semiconductor equipment and tools.

But is any nation going to emerge as a clear winner by intensifying the war by other means and dragging in longer? While one looks at their limits and compulsions, especially of domestic ones, it is evident that the case is not so. The U.S. economy is already grappling with inflation, which Trump has promised to cure once he holds the reins, but imposing tariffs on Chinese goods will only make imports dearer for American consumers and further eat-away their purchasing power. And Chinese economy is already suffering from slacking growth and imposition of tariffs would only fuel the downside slide. Though Communist Party of China strongly emphasized, in a recent Conference, on boosting domestic demand but given the new trend among its youth towards embracing minimalist life style the road is going to be long and bumpy. Moreover, China can’t afford hitting back dollar with dollar as when it comes to imposing tariffs as China exports three times to American as compared American exports to China; neither can China afford hunting American business for longer as much needed investment could get diverted to other destinations.

The U.S. Geological Survey has predicted a loss of $3.4 billion loss to American economy in case of China’s restriction on exports of gallium and germanium; and restriction on scholarly cooperation among two nation would lead in drop of innovation in U.S. as a high proportion of AI scientists in U.S. hail from China. On the other hand, entrepreneurs at Chinese AI firms are upset about banning Nvidia chips as it is going to hamper their efforts to train their large language models.

When deep dangers are involved no one can be blamed for looking to his own interest, but reckless and unthoughtful hunt for one’s own interests only brings more harm than summons any good. The US-China while safeguarding their national interests in the battlefield of geo-economics, also, need to restrain and slowdown confrontation, and create more time to engage in negotiations.  Xi declaration, according to China’s state media, that tariff wars, trade wars and technology wars are against historical trends and economic principles, and there are no winners, and Trump’s invitation to Xi hints towards possibility of open dialogue and reconciliations between the two.  But what would be Trump’s behavior once he is in the Oval office, nobody knows, maybe even Trump himself doesn’t know.

Ishfaq Ahmad Thaku teaches at department of commerce, university of Kashmir