“The U.S. and China are now in the most dangerous period in the past 40 years,” Lu Xiang of the prestigious Chinese Academy of Social Sciences told Bloomberg. “Mr. Trump put a knife on our neck. We will never surrender.”
In Beijing, what Americans call a “trade war” is now considered an existential struggle, an attitude revealing fault lines in Chinese political circles. As a result, no one should expect a quick settlement of the dispute.
Nonetheless, there was in the U.S. some measure of optimism about discussions in Washington, scheduled for Wednesday and Thursday. Beijing has sent a nine-member delegation, headed by Vice Commerce Minister Wang Shouwen, to meet with David Malpass, Treasury undersecretary, in what is described as “lower-level trade talks.”
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These talks, many hoped, would create a “road map” to a solution. The Wall Street Journal reported last week that both sides were working toward a resolution by the time President Donald Trump meets Xi Jinping, the Chinese ruler, in multilateral summits in November. Most observers expect the two leaders will see each other in Buenos Aires at the G-20, which starts at the end of that month.
The hope was misplaced, something evident from the change in thinking in the Chinese capital. China’s leaders and officials, in a few short months, have traveled the road from arrogance to anxiety.
At one time, the Chinese believed they could control Trump. The view, not unreasonable then, was that he was like the American presidents starting with Bill Clinton, who talked tough on China during campaigns but governed with Kissingerian pragmatism after settling into the White House.
At first, President No. 45 did not disappoint. Trump seemed susceptible to Chinese flattery, especially during his visit to Beijing last November, and he repeatedly called Xi “my good friend.” Trump surely made the Chinese even more confident when in a series of tweets he suggested giving China a break on trade in return for help on North Korea.
Confidence in Beijing turned to confusion, however, as Trump threatened and then imposed tariffs on Chinese goods. In March, Trump levied, pursuant to Section 232 of the Trade Expansion Act of 1962, tariffs on Chinese steel and aluminum, but the “trade war” everyone talks about relates to tariffs imposed under Section 301 of the Trade Act of 1974.
Section 301 tariffs were put on $34 billion of Chinese goods, and then another set, on $16 billion of such goods, went into effect Thursday. It is certainly no coincidence that Vice Minister Wang’s talks in Washington started the day before the new tariffs applied.
Wang had an uphill climb to stop the new measures. Trump, gleefully, has also talked about putting tariffs on all products from China. Last year, the U.S. imported, according to the U.S. Commerce Department, $505.5 billion of goods from that country.
Color the Chinese dazed. “While no American can speak with great confidence about the internal Communist Party machinations in the best of times,” Joseph Bosco, former Department of Defense China country director, told The Daily Beast, “I believe the Trump administration’s assertive approach to trade issues has created even greater confusion and disarray in party circles.”
Confusion and disarray have led to despair. The Chinese, stripped of arrogance, are starting to realize they cannot win a sustained struggle with an overwhelmingly powerful—and obviously feisty—president of the United States.
That does not mean Xi Jinping, in the midst of grabbing absolute power, is more amenable to a negotiated solution. As “Chairman of Everything, Everywhere, and Everyone,” he has become responsible for all that occurs. Consequently, he cannot be seen as losing the trade war—and maybe not even compromising.
His logic is simple. First, there is a tactical issue. “Trump is very confident now, and China should not appear weak,” a “former Chinese trade official” told Hong Kong’s South China Morning Post. “China has to appear confident and stand firm, resisting the maximum challenges by Trump. Making too many concessions at an early stage will only push Trump to be more provocative.”
There is a far bigger concern for China, however. Trump’s demands to Beijing—end subsidies, stop forced tech transfers, and dismantle industrial policies like Xi’s infamous Made in China 2025 initiative—are seen, as Bloomberg describes it, as “posing an existential threat to the Communist Party.”
That by itself defines the stakes for Xi’s China. Furthermore, there is something just as fundamental: Washington, in response to persistent Chinese belligerence, is in the process of ditching its four-decade-old “engagement” approach and adopting containment-like policies. Both Trump’s National Security Strategy, issued in December, and his National Defense Strategy, released the following month, target China in unambiguous terms.
Chinese policymakers have read both documents and are now alarmed. Cheng Li of the Brookings Institution called the labeling of Beijing a strategic competitor “a big blow for China.” “For Beijing,” Li told the South China Morning Post, “everything can be discussed as long as it was treated as a possible partner or a friend. But many things can’t be negotiated as enemies.”
An Gang of the Pangoal Institution in Beijing, reflecting this new perception, told Bloomberg this: “The trade war has prompted thinking in China on whether a new cold war has begun.”
And perhaps not just a cold war. “Although it’s not very likely at the moment, we need to be careful about the risk of escalation from a trade war to a real war,” said Brookings’ Li. “We should not have illusions because we’ve never seen the danger of a military conflict or a limited hot war running unusually high between our two countries for a long time.”
Li, who has made a career of informing Washington policymakers of Chinese thinking, not only warns of hot rhetoric in the Chinese capital but also reveals the warped perspective there.
And something else is going on in Beijing. In recent weeks, there have been many assessments, from both inside and outside Communist Party councils, that Xi has been weakened politically due to various factors, one of them Trump’s unexpected trade challenge. That erosion is evident from open carping on not just trade but also on Xi’s signature One Belt, One Road initiative. China’s leader must think the fastest way to stop the grievous erosion in authority is to prevail over the mighty Americans in the tariff tiff.
Xi knows fallen Chinese leaders can meet gruesome fates, not least because he has relentlessly persecuted foes and thereby created enemies. He undoubtedly feels he has no choice but to fight to the end, even if it means taking the People’s Republic with him.
Trump will undoubtedly oblige. As he told Reuters on Monday, speaking of the Chinese, “I’m like them; I have a long horizon.”
