For many nations, the consequences of the ongoing trade war between the US and China have been minimal. But for those that import goods from Asia’s largest economy into the US or vice versa, it has been significant. President Donald Trump has imposed a range of sanctions at different rates and with exact consequences, with many goods facing a 10% or more hike on the import price – and the Chinese government has quickly retaliated.
The long-term consequences of these tit-for-tat measures could be extreme. There’s a likelihood that the US and China will engage in a period of profound and prolonged geopolitical tension for example, while it’s also possible that it will spell the end of free trade more widely. This article will discuss what the potential consequences of this trade battle could be for the rest of the world.
A lengthy “Cold” War?
While the prospects of the US and China engaging in a decades-long battle over what is currently still just a trade dispute may seem minimal, a war of non-aggression like the one America was embroiled in during the late 20th century with the USSR could be on the horizon. And it’s important to remember that the political conditions then were in some ways, although not all, the same as they are now. As Angela Stent has pointed out, the US positioned itself as a patriotic bastion of capitalism during the Cold War, and its adversary at the time – the Soviet Union – was a centralized, authoritarian state with an anti-American agenda. Looking more broadly, that’s much the same as China is now.
A war of non-aggression like this could lead to actual military conflicts (or “proxy wars”) elsewhere, as happened during the Cold War: then, less powerful states like Vietnam were dragged into the stand-off, and it’s possible something similar could happen again. A less dramatic possible outcome could be less cooperation on international initiatives: if, for example, leaders in countries like the United Kingdom and Germany find themselves searching for signatories to climate accords, the US and China might, if they’re embroiled in a stand-off, choose to avoid cooperation and signing.
An end to free trade?
Free trade has long since been a key aim of many US administrations, and it’s easy to see why. Previous US governments have extolled its virtues as an integral part of the liberal capitalist system, and ten years ago it was largely unthinkable that tariffs might ever be instituted on a large, systematic scale. Free trade has, they claim, brought the world closer together by creating global supply chains which are larger than any one country’s whims, and they often mean that the price of goods can drop as all sorts of global actors compete to provide the best products and the lowest prices.
But there have also been criticisms of free trade. To some, it’s why businesses in domestic markets such as those of the UK and the US have declined. The reason being, that competitors – like China – are often able to provide cheaper products. With countries like France seeing the “gilets jaunes” protests taking a stand in part against the economic effects of internationalization, rising tariffs between the two largest economies on the globe could well offer a model for anti-free trade agitators.
Perhaps the most unlikely potential effect of the trade war between the US and China would be an all-out war between the two countries. In the event that the trade war cannot be resolved, the next step could be a show of aggression by one of the parties, with the South China Sea being a likely flashpoint. This is exacerbated somewhat by the risk that President Donald Trump, who relies on a patriotic and populist support base for his potential re-election in 2020, might decide to give a demonstration of the United States’ military strength.
If this was to happen, the main consequence for the rest of the world would be for those countries that are members of the North Atlantic Treaty Organization, or NATO. Almost 30 countries across Europe and North America are bound by a pledge of collective defense, so if the United States was to be attacked militarily in some way by China, then the UK, France, Germany, Canada and the other member states would be expected to step up to the plate and contribute to the defense of the US.
The ongoing battles between President Trump and the government of China have had some consequences so far and there is no end in sight just yet. Some observers are concerned that the problem could quickly spiral out of control and turn into some sort of war, whether “Cold” or otherwise, in just a few short years. And even if that doesn’t happen, it’s likely that an end to what the West has come to recognize as the established global order of free trade is also under threat.