THE US-China trade war continues, but even if it were to end tomorrow things would never be the same. US-China trade will never be what it once was back in the 90’s and 2000’s. That model no longer works, and in many ways, the world itself has moved on from that particular paradigm.
The trade war is the latest manifestation of this transition, a transition that some analysts warn could lead to a global recession. It’s true that China’s GDP has grown substantially in the past couple of decades but the same is also true for its household and total debt to GDP. Furthermore, the PRC has inequality issues, and it’s affecting the country’s ability to shift economic growth from export and investment to domestic consumption. In other words, China has become wealthier and more powerful, but its economy remains brittle.
As for the United States, it has many of China’s problems, plus an increasingly unstable political landscape. Furthermore, Americans are tired of globalization, and outsourcing and mass immigration in particular. The fact that America has a higher debt servicing capacity and a higher standard of living than China won’t change US public sentiment with regards to globalization and US-Chinese trade. Indeed, the American public’s animosity towards China is partly rooted in resentment against the effects of globalization on the American middle and working Classes.
Even if China and the US were to end the trade war tomorrow, these forces will not go away. There will still be commerce, of course, but it’s almost impossible to go back to the 2000’s. China’s economy has matured past its previous role as a manufacturer of low cost items, and America is tired of globalization. For now, though, the longer the trade war continues, the greater its effects will be, not only on China and the United States, but on global trade as well.
A new trading paradigm is needed; one that reflects the more transactional nature of post-Pax Americana. It probably won’t be pretty, and some analysts believe that this new paradigm will represent a return to 18th and 19th century trade, where war and economics were intertwined, but that’s the world were headed into./PN
