Trump’s Trade War: Where is it Going?

President Trump made no secret of his intention to change the balance of US trading relations with China all through the 2016 campaign. At first, when he took office, it seemed things with China were going rather well, but now things do not look so good. There was an assumption that China would give in or compromise after the opening salvo. This turned out to be wishful thinking, as anyone familiar with China and its history predicted. The latest upgrade in US tariffs on Chinese goods is a big one and it is likely to have no effect. Trump’s threat to top this with a total tariff blanket on everything  coming in from China will almost certainly have to be activated, unless he backs down, which he won’t.

What does the US gain from this? In the short term a boost to home production and increasing popularity for Trump in his hard core base, although maybe not so good among floaters and women. But in the longer term the implications may not be so welcome in Washington. The post Cold War emergence of global capitalism and free trade was underpinned by America’s willingness to buy Chinese, thus helping to transform one of the world’s most backward economies into one of the most advanced. It also transformed the last Communist state into the second largest capitalist economy, a combination few thought possible. An odd blend of political communism and economic capitalism. All this depended on an understanding that China and the US were in a partnership to drive the world economic engine.

But there are now signs that China is beginning to turn away in the face of Trump’s assault, cosying up to Russia and seeing a future where it does not need America. Indeed a future in which China becomes the major global player, while America turns in upon itself. The UK, whose relations with China are good, better than with Russia and at some level  better than with the political elements in the US, has factored Chinese power in to its post Brexit future.

The question is, has America factored Chinese global investment and its impact on its own aspirations for the future shape of the world? Or has it decided politically to step aside and leave it all to Apple, Amazon, Facebook, Twitter and Microsoft? At least it would save a fortune on its oversize military. Enough to deter but not to demand. This may sound flippant but dig down and you may find something real.