China is not just another front in President
Donald Trump’s war on trade. Unlike Mexico, Canada, Europe and other
targets of the president, China will be a source of economic conflict
for years to come, long after the tariff level on soybeans has been
settled. Like the rivalry with the Soviet Union, economic competition
with China may form a cold war that shapes American politics and
economic policy for a generation or more.
Donald Trump’s war on trade. Unlike Mexico, Canada, Europe and other
targets of the president, China will be a source of economic conflict
for years to come, long after the tariff level on soybeans has been
settled. Like the rivalry with the Soviet Union, economic competition
with China may form a cold war that shapes American politics and
economic policy for a generation or more.
Until now, through flukes of timing, Americans have largely been
distracted from China’s economic development. China joined the World
Trade Organization in December 2001, three months after the Sept. 11
terrorist attacks. For the next several years, America’s focus was
terrorism and war in the Middle East, not China’s ascension and its
impact on the U.S. economy. Next came a financial crisis and the great
recession, which became the national focus for the next several years.
The post-recession political environment in the U.S. has largely been
one of government dysfunction and partisan polarization.
distracted from China’s economic development. China joined the World
Trade Organization in December 2001, three months after the Sept. 11
terrorist attacks. For the next several years, America’s focus was
terrorism and war in the Middle East, not China’s ascension and its
impact on the U.S. economy. Next came a financial crisis and the great
recession, which became the national focus for the next several years.
The post-recession political environment in the U.S. has largely been
one of government dysfunction and partisan polarization.
But changes in both China and the U.S. make the current period
different. In China’s period of economic development in the 2000s and
much of the 2010s, there were clear benefits for the U.S. even if there
were tradeoffs as well. China opening up gave some U.S. industries
greater access to the Chinese domestic market. U.S. consumers benefited
by getting cheap goods produced in China. There was a hope that
integrating China into the global economy would shift its culture to be
more like the West.
different. In China’s period of economic development in the 2000s and
much of the 2010s, there were clear benefits for the U.S. even if there
were tradeoffs as well. China opening up gave some U.S. industries
greater access to the Chinese domestic market. U.S. consumers benefited
by getting cheap goods produced in China. There was a hope that
integrating China into the global economy would shift its culture to be
more like the West.
With China announcing its “Made in China 2025” economic vision, it’s
difficult to see much benefit for the U.S. Seeking to become
self-sufficient in industries ranging from aerospace to semiconductors
to robots threatens American jobs, corporate profits and global
technological leadership. China also becomes more of a national security
threat.
difficult to see much benefit for the U.S. Seeking to become
self-sufficient in industries ranging from aerospace to semiconductors
to robots threatens American jobs, corporate profits and global
technological leadership. China also becomes more of a national security
threat.
We’ve seen in recent years that as global institutions fray,
political and cultural power defaults to the players with the most
economic clout. In Hollywood, movies are made increasingly with the
Chinese audience in mind, which means ensuring that movies can pass
Chinese censors. In oil markets, power is shifting to Saudi Arabia and
Russia away from OPEC as the two countries’ share of production
increases. And in Silicon Valley, while large companies may be debating
whether and how much to censor content in the U.S. market, there’s no
such consternation about censorship if it means access to the Chinese
market.
political and cultural power defaults to the players with the most
economic clout. In Hollywood, movies are made increasingly with the
Chinese audience in mind, which means ensuring that movies can pass
Chinese censors. In oil markets, power is shifting to Saudi Arabia and
Russia away from OPEC as the two countries’ share of production
increases. And in Silicon Valley, while large companies may be debating
whether and how much to censor content in the U.S. market, there’s no
such consternation about censorship if it means access to the Chinese
market.
The doomsday scenario for Americans and American values looks
something like this: Made in China 2025 is a success. Through a
combination of China subsidizing its own companies to innovate and
develop their own technologies, and buying or perhaps stealing valuable
technology from American companies, China becomes the global leader in
technological innovation. Its economic growth continues to outpace
American economic growth, and over time it’s America forced to adapt to
Chinese values in key areas in the global economy rather than the other
way around.
something like this: Made in China 2025 is a success. Through a
combination of China subsidizing its own companies to innovate and
develop their own technologies, and buying or perhaps stealing valuable
technology from American companies, China becomes the global leader in
technological innovation. Its economic growth continues to outpace
American economic growth, and over time it’s America forced to adapt to
Chinese values in key areas in the global economy rather than the other
way around.
This is a scenario that is likely to unite Democrats and Republicans.
And indeed, that seems to be happening, as Congress seeks to increase
scrutiny around foreign investment in the U.S.
And indeed, that seems to be happening, as Congress seeks to increase
scrutiny around foreign investment in the U.S.
The ramifications of this growing rivalry between the U.S. and China
are likely to be far-reaching. Will Chinese students still be allowed to
study at American universities? Will high-skilled Chinese workers still
be allowed to work in Silicon Valley? That may be up for debate if
there’s concern about spies intent on returning to China with
information useful for Made in China 2025.
are likely to be far-reaching. Will Chinese students still be allowed to
study at American universities? Will high-skilled Chinese workers still
be allowed to work in Silicon Valley? That may be up for debate if
there’s concern about spies intent on returning to China with
information useful for Made in China 2025.
A future economic cold war between the U.S. and China may push
American leaders to favor a pro-growth policy at any price, even if that
risks stoking additional inflation and inflating economic bubbles. If
China invests more in space exploration, that could kick off another
space race. In whatever realm China decides to emphasize, the U.S. will
be afraid to let it get too far ahead.
American leaders to favor a pro-growth policy at any price, even if that
risks stoking additional inflation and inflating economic bubbles. If
China invests more in space exploration, that could kick off another
space race. In whatever realm China decides to emphasize, the U.S. will
be afraid to let it get too far ahead.
Fights over currency manipulation and soybean tariffs are likely to
be just the beginning. The economic conflict between the U.S. and China
could define the next generation of American life.
be just the beginning. The economic conflict between the U.S. and China
could define the next generation of American life.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Conor Sen is a Bloomberg Opinion columnist. He is a portfolio manager
for New River Investments in Atlanta and has been a contributor to the
Atlantic and Business Insider.
for New River Investments in Atlanta and has been a contributor to the
Atlantic and Business Insider.
