US-China Trade War: Long-term Geostrategic Clash

Escalation that leads to a shooting war will damage US more
Empowering Weak & Oppressed

Kevin Barrett

Muharram 02, 1441 2019-09-01

News & Analysis

by Kevin Barrett (News & Analysis, Crescent International Vol. 48, No. 7, Muharram, 1441)

Since 2018 the Trump regime has been waging an on-again-off-again trade war against the People’s Republic of China. News reports about each new development in the US-China trade war tend to either spook or reassure the global markets; it seems that investors, and the general public, are locked into a short-term frame of reference (anyone who knows what Trump will tweet next can make billions of dollars gaming the markets!). But it’s important not to lose sight of the big picture: the long-term geostrategic contest between a rising China and a declining American hegemon. So let’s glance briefly at the timeline of trade war shots that have been fired this summer, and then think about how they fit into the medium- and long-term struggle for global dominance.

The biggest salvo of the year was unleashed on May 5 2019, when Trump, acting under the influence of anti-China advisor Peter Navarro, hiked tariffs on Chinese imports from 10% to 25%. Ten days later, Trump signed Executive Order 13873 restricting the export of information technology to “foreign adversaries.” Huawei, in particular, was targeted. China retaliated on June 1 by hiking tariffs on US goods. After a month of bickering, Trump announced on June 29 that he and Chinese President Xi Jinping had reached a trade war truce. But the details were unclear, especially regarding Huawei. Though Trump claimed he would allow US companies to sell to Huawei, it was never actually taken off the US blacklist. Nor was its CFO Meng Wanzhou released from custody in Vancouver, Canada, where she is being held pending a US extradition request involving criminal charges for Iran sanctions busting.

Trump’s bogus “trade war truce” was exposed as a fraud in early August. On the first of the month Trump announced a new 10% tariff on the $300 billion of Chinese imports that wasn’t covered earlier. Then on August 5 China’s state bank retaliated by letting the yuan fall 2% — the largest Chinese devaluation in more than two decades. Global stock markets plunged in anticipation of tit-for-tat devaluations spreading worldwide.

As China launched a new round of global devaluation wars, the US Treasury Department officially declared China a currency manipulator (most objective sources, including Western ones, agree that China’s currency is correctly valued, while the US dollar is overvalued). The same day, August 5, China announced that its state-owned enterprises will stop buying US agricultural products. That eliminated a $20 billion market for US farmers. A few days later, August 9, China accelerated its sell-off of US Treasury bills, unloading as much as 25% of its $1.1 trillion holdings. This hinted at China’s possible deployment of its “nuclear option”: a total sudden sell-off of US assets that would crash the dollar, ending America’s ability to pay for its vast empire of more than 900 military bases worldwide.

On August 13, Trump delayed implementation of about one-third of his anti-China tariffs, signaling that he may be backing down and conceding provisional victory to China (at least until after the 2020 US elections). But then 10 days later, he hiked the October 1 tariff rate to 30% and the September 1 rate to 15%, signaling all-out trade war. What Trump will do is anybody’s guess. The escalating trade war is spooking markets worldwide, threatening an economic downturn that could spoil Trump’s chances in 2020. US farmers, in particular, are hard hit by their loss of the huge Chinese market, and Trump’s Democratic challengers are highlighting farmers’ problems to undermine Trump’s boastful claims about his supposed prowess as a businessman and negotiator.

Meanwhile unrest continues in Hong Kong, where many suspect that the US is using Gene Sharp’s color revolution playbook to challenge China (Hong Kong, long a British colony, remains a Western-supported outpost of unfettered neoliberal capitalism, despite China’s assertion of sovereignty there). Ironically it is Western-style neoliberalism, which produces enormous disparities of wealth, that has destabilized Hong Kong by making housing there prohibitively expensive for ordinary people.

Regardless of how Trump’s trade policy and tariffs have impacted farmers and working-class manufacturing and service jobs, the real question has always been how the trade war affects the bottom line of America’s billionaires, and how it can be used as leverage for America’s foreign policy objectives in the resource-rich Muslim East. Currently, America has no replacement industry for mining the exotic metals and precious minerals that drive the information age, a key part of which are the offshore manufacturing platforms (much of them in China) of US tech firms that are now clamoring loudly (right around election time) of such a policy being unsustainable. Billionaires are one millah, and sooner rather than later, the White House will cave in with some kind of carefully crafted face-saving doublespeak designed to appease the POTUS’ base, not the least because of pressure from the billionaires in his own handpicked cabinet. As far as US projection of power through sanctions, Islamic Iran has exposed the US as the paper tiger that it is, and China has been watching developments; with its economic and expanding military reach, all it really needs to be wary of are US dirty tricks as in Hong Kong.

The on-again-off-again trade war, with its links to political strengths and weaknesses of both the US and Chinese systems, is part of a struggle for dominance that involves international institutions and alliances, but whose ultimate arbiter is raw military power. And the military dimension of the US-China struggle is heating up. Even as Hong Kong was erupting into chaos, another “autonomous” (Western-colonized) sector of China, Taiwan, purchased $66 million in US F-16 fighter jets on August 19, angering Beijing and eliciting threats of retaliation. The deal, which awaits US Congressional approval, would be the first US fighter jet sale to Taiwan since 1992.

The US is obliged by law to defend Taiwan, which China considers a treasonous renegade province. What will happen when (not if) China makes its move to re-absorb Taiwan? On August 19 the University of Sydney’s United States Studies Centre released a report stating that US military forces in Asia are “dangerously overstretched” and “ill-prepared” for conflict with China. In any such conflict, the report stated, Chinese missiles would likely overwhelm US forces within hours. Would the US really risk a quick escalation to strategic nuclear strikes, raising the specter of a civilization-ending catastrophe, in order to defend relatively insignificant Taiwan, which everyone admits is Chinese? Yet by backing down, thereby reneging on its solemn legal obligations, wouldn’t the US massively downgrade its role in the international pecking order, announcing that the “new American century” was officially over?

The likelihood of China deciding to take back Taiwan sooner rather than later would be greatly increased if the Beijing authorities follow through on threats to use Chinese force to quell ongoing Hong Kong protests. Such a move would likely end Hong Kong’s special status as a Chinese window to Western financial markets. The result would be massive escalation in the trade war, heightened tension, anti-Beijing anger in Taiwan, and increased likelihood of a spark kindling the fires of a shooting war.

Alarmingly, some of Trump’s advisors seem to welcome that prospect. Retired Air Force General Rob Spalding, who has helped craft China strategy for Trump’s National Security Council, suggests that China has informally set October 1, the 70th anniversary of the Chinese revolution, as the deadline for Hong Kong authorities to put down the protests and restore order. “They’re not going to allow for these protests to go past that and interrupt that,” Spalding told the Washington Examiner. “So, rather than the US decoupling [from China’s economy], it could very well be the Chinese decide to decouple, just to preserve their central party.”

The decoupling of the Chinese and US economies, setting off a horrendous economic downturn one year before US presidential elections, would present the Trump regime with a stark choice: either concede the elections to the Democrats, or gamble that becoming a chest-thumping “war president” with special emergency powers might deliver not only the election, but perhaps even the status of permanent American fascist military dictator that Trump seems to crave.

In the absence of war, decoupling the American and Chinese eco-nomies would hurt the US more than China. The US has been using its unique reserve currency privilege to print money and buy real goods and services from China in exchange for what amounts to green paper (or its even cheaper digital equivalent). Decoupling means ending the Americans’ ability to continue extracting real value from a far more productive China. It is difficult to understand how American strategists like Gen. Spalding can look forward to economic decoupling unless they see it as a prelude to what they really want: a preemptive war designed to stop China’s rise to world leader status. From the American perspective, the earlier such a war happens, the better; each peaceful year that goes by represents an incremental loss of America’s once overwhelming military, technological, and economic edge.

Will the US and Chinese leadership work out a modus vivendi that allows for China’s peaceful rise, accompanied by America’s gentle decline till it finally becomes just another normal nation? Or will American (and Zionist) dreams of permanent global hegemony unleash nuclear hell on earth?

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