(Photo: CGTN)

This trade friction, which is not limited to China and the US, has deep roots in the restructuring of domestic politics taking place in the two largest economies in the world, as well as in changes in the mutual perceptions the countries have of one another.

While China-US interdependence and common interests continue to expand, their technological and strategic competition has come earlier than expected. Economic competition, combined with differences in ideology, development models and political systems, may push China and the US into the dangers of a “new Cold War.”

Trump’s trade war with China and the world

On March 22, the Office of the US Trade Representative (USTR) released a Section 301 report on China’s trade practices. Based on that report, Trump issued a presidential memorandum that called for countering China’s “economic aggression,” and instructed his administration to impose extra import tariffs on 50 billion US dollars in goods from China, and to restrict Chinese investments in the US.

The report mainly accused China of restricting the ownership rights of foreign enterprises and demanding the establishment of joint ventures, thus forcing US companies to transfer technology to Chinese companies.

On March 8, before the launch of the trade war with China, the US had announced the results of an investigation under Section 232 (the “national security” exemption) of the US Trade Expansion Act of 1962, and declared it would impose a tariff of 25 percent on imports of steel into the US and a 10 percent tariff on aluminum imports.

While these measures would have an impact on China, the countries that would be most severely affected are close US allies, including Canada, the European Union and Japan.

So far, only South Korea has agreed to accept “voluntary” export restrictions to reduce trade in steel and aluminum products. Trump himself revealed that he will launch attacks against automobiles made in Germany and other countries.

Trump’s trade policy reflects his “America First” political philosophy and his adherence to an outdated concept of trade that pays overwhelming attention to trade imbalances. He believes that all countries that have a trade surplus with the US are engaged in “unfair” trade.

To correct this, he believes the US must leverage its domestic laws to impose sanctions or threaten sanctions on its trading partners. The Section 301 and Section 232 actions are all unilateral, based on US domestic trade laws, in violation of the obligations of the US as a WTO member, thus severely impacting the multilateral trading system the US helped to establish after the Second World War.

In addition to launching a unilateral trade war, the US is blocking the appointment of new judges for the WTO dispute settlement mechanism, a move aimed at paralyzing the mechanism as an excuse for its unilateral measures.

In short, Trump and his administration’s thinking on trade policies reflect views that are behind the times and violate WTO obligations. The “America First” protectionist trade policy is subverting the very multilateral trading system the US itself established.

Choosing the future

For now, Trump’s “America First” policy is focused on seeing the trade imbalance as a long-term threat to US national security. Although the influence of hardliners and security strategists on maintaining US hegemony is on the rise, they have not yet dominated the direction of Trump’s China policy.

However, we must be vigilant. If China-US trust cannot be restored and promoted, the Taiwan issue, the issue of the South China Sea, and competition in the high-tech sector may push China and the US into a new Cold War, repeating the history of the US-Soviet confrontation.

The future of China-US relations faces two options. The first is that the two countries strengthen cooperation under the framework of global governance.

China and the US can reach a lot of consensus on the framework of global governance and jointly provide international public goods to safeguard common interests. As the world’s two largest economies, they have special responsibilities for maintaining global peace and stability and safeguarding the global open trade system and the stability of the international financial system.

In the past, the two countries, generally speaking, handled their relations in a practical way, and as a result, their shared interests and consensus have continued to expand.

Noticeably, they have made considerable progress in cooperation within the G20 framework, and the US has also shown some flexibility in allowing China to play a greater role, while China respects the status of the US in the international system.

Both sides should properly handle economic and trade frictions. In the face of dissatisfaction and complaints from the US government and US corporations, the Chinese side should realize that this is an expression of the strong US interests in the Chinese market.

According to 2017 statistics, China has surpassed the US as the world’s largest consumer market. The latest survey data from the American Chamber of Commerce in Shanghai also showed that US-invested companies in China are significantly profitable and over 60 percent of US companies plan to expand their investment in China.

Economic and trade relations as a “stabilizing stone” in bilateral relations have not been shaken. In economic and trade negotiations, the Chinese side should adhere to principles, and respond to unreasonable US demands with strength.

At the same time, China must deepen reforms and expand its opening up to consolidate the common interests that are the foundation of China-US relations.

The scenario of a new Cold War can be avoided if the two countries work together and find common ground. It is necessary to adhere to the basic policy of building a “new type of great power relations” between China and the US.

In 2012, President Xi Jinping proposed such a strategic idea, in which both countries would commit to establishing such relations, based on the principle of no conflict, no confrontation and mutual benefit.

Facing the rapid rise of China, US elites have a deep sense of anxiety about the possibility of America’s decline. It is all the more necessary for the two countries to adhere to and implement this strategic policy, in order to avoid the so-called Thucydides trap, which postulates that war between a rising power and an established power is inevitable.