This ongoing trade war between US and China is more than just about contentions over tariff. There is a lot more at stake. For China, it is clearly more about saving face than about economics. While China is not going to allow itself to be seen as being bullied by the US in any fashion, can the US really afford to take on China? Or is the US merely putting on a show to mark its territory as the most powerful nation in the world?
Trade has always played a key role in the relationship between the US and its allies. The Trump regime is trying to turn back several decades of US policy and this is bound to hurt more than the economies of the countries involved.
China is at the advent of a global economic dominance and already has a stronghold on the US in many ways. For example, the US tourism economy will be impeded if Chinese tourists stopped visiting the US. According to the US Department of Commerce, 2.97 million Chinese tourists travelled to the US in 2016, spending a total of $33 billion, the highest by any country that year.
The other ace that China holds in its deck of cards that’s insurmountable by the US is the more than $1 trillion it holds in US Treasury bonds. That’s China’s stranglehold over the US economy. At any given time if China wanted to declare economic war on the US all it really has to do is to unload a significant amount of these bonds and it would send the dollar tumbling. This would have a drastic impact on the US economy. Of course, such a step would also be counterproductive to China since it would also destroy the value of Chinese investment. But if for the Chinese, saving face is all that is left and if it means cutting off the nose to spite the face, then they would do it. And this is what Trump and his cohorts need to worry about.
For the US to declare a trade war with China, or any of its trade allies in the rest of the world, is just plain foolhardy. There is a certain art and logic to trade negotiations. You bring the pressure up gradually, not suddenly cut the cord. It’s not as simplistic as saying ‘you are taking away my jobs’. Trade is just one of the cards in play that determines geopolitical relations.
That said, however, Trump is known to go back on his own decisions and the world is biding its time to see if he will make a U-turn on this decision. There’s a lot at stake with nations heavily invested in the US. Trade wars hurt everyone on both sides. There are no winners.
My advice on this matter is that eagles should soar above and let the sleeping dragon lay dormant.
Vijay Eswaran is a Malaysian entrepreneur, philanthropist and author. He has published three bestsellers on leadership and mindfulness. Praised as “a beautiful book” by self-help genre pioneer Stephen Covey, In the Sphere of Silence (2006) has sold over half a million copies to date. His latest book Two Minutes from the Abyss was published in 2017 by Networking Times Press.
When not traveling the globe on business, he is a passionate advocate for improving the quality of higher education in South East Asia. Eswaran is the recipient of numerous awards for entrepreneurship and business leadership and has been featured in Forbes as one of Asia’s Top 50 philanthropists. He is also on the advisory board of the World Economic Forum’s Global Growth Companies, and a regular speaker at WEF’s annual meeting in Davos.