Xi Jinping vs. America First — The Trade War Begins

Half a century had passed since Nixon’s visit to China. America had placed a grand bet on China. Open the market, weave the country into the global economy, and in time China would grow rich — and once rich, it would move closer to a free and open society. This engagement policy was a premise shared across many U.S. administrations.

Yet in the 2010s, that premise began to crack audibly. The trigger was the rise of two leaders. One, in Beijing, championed the ‘great rejuvenation of the Chinese nation’; the other, in Washington, shouted ‘America First.’ The values of the men leading the world’s two largest economies were destined to collide head-on.

The Chinese Dream — Xi Jinping Heads Toward a Strong Nation

In November 2012, Xi Jinping was elected General Secretary, the top post of the Chinese Communist Party. In March of the following year, 2013, he also became President, becoming China’s supreme leader in both name and substance.

Soon after taking office, Xi Jinping raised the phrase the Chinese Dream. Right after assuming the post of General Secretary in November 2012, he declared that ‘realizing the great rejuvenation of the Chinese nation is the greatest dream of the Chinese nation in modern times.’ To overcome the humiliating history of being trampled by the great powers since the Opium War, and to return China to the center of the world — beyond that gaze lay a long-term goal: by 2049, the centenary of the founding of the People’s Republic of China, to build a rich and strong ‘modern socialist power.’

Until then, China had been said to maintain the cautious diplomatic line that Deng Xiaoping had left behind — ‘taoguang yanghui,’ that is, to hide one’s strength and bide one’s time. But Xi Jinping’s China was different. It sought a voice in the international community befitting its economic power, modernized its military, and rolled out the vast economic-sphere initiative known as the ‘Belt and Road.’ From a nation that quietly built up its strength to one that openly displayed it — China’s posture had clearly changed.

America First — The Tariffs Raised High

On the opposite shore of the Pacific, too, a tectonic shift was underway. In 2017, the Trump administration, championing ‘America First,’ was inaugurated. At the heart of its economic diplomacy lay a strong dissatisfaction with the enormous trade deficit with China that had piled up over many years.

What the Trump administration took issue with was not only the size of the deficit. It argued that ‘forced technology transfer’ — American firms being pressed to hand over technology as a condition for entering the Chinese market — and infringement of intellectual property were the structural unfairness at the root of the problem. The Office of the U.S. Trade Representative (USTR) advanced an investigation under Section 301 of the Trade Act, and tied its findings to the concrete action of tariffs.

Then in 2018, the tariffs finally came down. In March, a plan to impose 25% tariffs on roughly 50 billion dollars’ worth of Chinese goods was announced, and on July 6, additional tariffs were first imposed on 34 billion dollars’ worth of Chinese goods. In August, a further 16 billion dollars’ worth was added, and on September 24, the scope expanded all at once to about 200 billion dollars. The world’s first and second largest economies had drawn the weapon of tariffs against each other.

The Chain of Retaliation, and a Brief Truce

When America struck with tariffs, China would not stay silent. China responded with retaliatory tariffs of comparable scale on U.S. products such as soybeans and automobiles. The targets were the products of the farm states that formed the Trump administration’s support base. Attack for attack, political pressure point for political pressure point — the exchange of tariffs took on the look of a war of attrition, each side striking at the other’s tender spots.

This trade war shook not only the two countries’ economies but supply chains around the world. The friction of tariffs was introduced into the efficient division of labor — assemble in China, export to the world — that had been built up over many years. Firms were pressed to review their production bases, and the move toward ‘China Plus One’ — dispersing bases to another country in addition to China — reportedly accelerated.

After a fierce exchange, in January 2020 the two countries sheathed their swords for the time being. They signed the ‘Phase One agreement,’ in which China pledged, among other things, to greatly increase its imports from America. On the surface it was a truce. Yet many of the tariffs remained afterward, and the fundamental conflict over unfair practices was not dissolved. This was not the end of the war, but merely a fleeting ceasefire.

What Lay Beyond the Tariffs

The trade war showed the world vividly that the very nature of the U.S.-China relationship had changed. What had once bound the two countries was the economic self-interest of ‘profiting each other.’ American firms seeking cheap labor, and China seeking jobs and technology — that alignment of interests had papered over the political rift.

Yet the tariff war tore that cover away. Economic interdependence was no longer a sign of friendship; rather, it came to be felt as ‘a weakness, having the other grip you by the throat.’ An anxiety over depending on each other too much — this was the new emotion that would run through the U.S.-China conflict thereafter.

And as the exchange of tariffs continued, the two countries realized something more important. The contest over which side would sell cheaper goods was, in fact, only the entrance. The true main battlefield lay in technology itself, which would determine the hegemony of the next generation — semiconductors, communication standards, artificial intelligence. From tariffs on visible ‘goods’ to control over invisible ‘technology.’ The stage of the fight was shifting, quietly but decisively.