US – China trade war in Russian political discourse: strategic opportunities VS. Economic challenges

Over the last couple of years, the escalation of tensions between China and the US have been gaining momentum and have reached its apex in 2018 with turning into a trade war with the imposition of tariffs from both sides. China' economy has been since 1980's with the reforms introduced by Deng Xiaoping. Such economic might was warring the international community, thus calling for regulation by certain rules, leading to the acceptance of PRC into the WTO in 2001. China has become the second largest economy after the US and the first in terms of GDP PPP in 2013 (World Bank, 2020a), becoming the US competitor both in economic and geopolitical terms. In order to investigate the reasons behind such rapid unfolding of the trade tensions into trade war it is important to evaluate the structural problems first. Many theorists apply the model formulated as early as by Thucydides to the US-China relations to explain the emerging conflict. While some argue that the war is inevitable (Mearsheimer, 2014), others stress that it could be avoided (Kissinger (2011), Allison (2017). The structural preconditions, however, do not signify that the US-China trade war was solely political in nature. Trade measures have also been adopted regardless the explicit security concerns, likewise, Zuev (2019) asserts that the US started to limit imports of Chinese steel long before the outbreak of mutual tariff escalation. As the degree of strategic confrontation intensified, the trade measures bursted out into a trade war. Before Trump, the US it was perceived that even if the US-China relations are to get spoiled, the trade would not be at risk due to the mutual economic interdependence. The remaining question, however, is why this interdependence did not hedge the trade tensions from escalating into a full-scale trade war that has put the global economy at danger.

Power transition theory can be applied to the current Sino-US relations. The theory stresses upon the fact, that a fast-rising power strive to challenge the existing hegemon's order and establish its own status quo. In the present-day world, economic statecraft may be even more influential than military one, especially given the nuclear deterrent. While power transition concepts tend to explain US-China relations in strategic terms, there are some concepts, focusing on economic aspects.In mercantilist view, countries use their capital might to boost the military as well. Given this logic, the structural problems of the relations between the US and China lie first and foremost in the economy. The economic interest of the two, despite their high interdependence, clash and the redistribution of power occur. Such redistribution is due to the fact that the Chinese economy is growing much faster given the framework of the established relations between US and China and in the world as a whole.

The US order is being challenged by rising China, moreover there can be no assurance that China will rise peacefully and is not a revisionist state, that seeks to undermine if not the entire economic system but certainty the US influence in Asia, where the economic center of gravity is shifting. In fact, given the actions of the current administration to hit first it seems that the US perceives China exactly as a revisionist rising power. This challenges the idea of the power transition theory that a rising hegemon will seek to challenge the declining one. Yet, most likely the effect is the reverse. To use Chan's (2008) logic, the declining power or hegemon seeks to challenge the rising one in in order not to lose the existing preferential position, while yet having might to contain the counterpart as the rules of the system disproportionally favor the dominating state.

Given the fact that China has benefited enormously from the established order allowing it to grow at the average of 9% of GDP annually between 1990 and 2018 (World Bank, 2020b) it has little incentives to revise the existing status quo. However, the distribution of benefits from the exiting order is the inherent source of conflict (Chan, 2008). The US is concerned with how much China gains from the order that is to be benefiting more to the US. The issue of relative gains has become especially important in the relations between US and China. The dominant power perceives it as a threat to its security if the rising power receives more from the existing order, thus the destabilization is to be initiated not by China that will avoid challenging the existing balance in order not to get off the track. Moreover, China has been explicit that it does not seek “hegemony, expansion or spheres of influences” and promotes cooperation and dialogue. (White paper: China's National Defense in the New Era, 2019). Despite such message the US could not be sure of the real intentions. Realizing the danger of such rapid strengthening of China, the US sought to rearrange the relations particularly in trade in order to secure its own position and become less dependent on trade with China, while limiting the ability of China to grow at the same pace. The threatening factor,as Liberman (1996) asserts, was notnecessarily the growth of China over the last decade or so, but the speed and disproportionate gains that China has been acquiring in relation to the US that for a long time has been the main beneficiary of the system it advanced. Chan further proceeds with the claim that such imbalance of benefits galvanizes the state with an “under-allocated” advantages relative to its power to consider going to war in order to improve the share back. Such actions cause states with the surplus of benefits to resist the reallocation which inevitably leads to confrontation with possible escalation to war.

What Liberman(1996) calls as “disproportionate gains” affect the security of states thus encouraging states to rationally weigh the payoffs of cooperation against the possible threats that are caused by the empowerment of other states. There is a longlisting debate over the conditions under which a state will limit or withdraw from mutually beneficial cooperation due to the “disproportionate gains” of the other state. The argument presented by Liberman, that the nuclear deterrent as well as the multipolar interconnectedness in commerce diminishes the threat of war and withdrawal from beneficial exchange between rivals, seems to have been challenged by the recent trade war between China and the US. For Liberman, the only condition that will distort economic cooperation is the “transfer of military technologies or loss of military self-sufficiency”, which did not happen in case of US-China relations. On the other hand, the issue of relative gains starts to be alarming with the rising military threat posed by the partner. Some scholars insist that China, despite its official statements, will not and cannot rise peacefully, as with strengthening of its economy it will also modernize its military capacity.

One of the most prominent supporter of such rhetoric is an offensive realist John J. Mearsheimer, who warns that China will pose direct military threat to the US influence in Asia, insisting that China seeks to become a regional hegemon that will challenge the US not only economically but militarily. Such statements are not groundless as over recent years China has initiated a modernization plan for the People's Liberation Army (PLA) to become a “world class” army by 2035. (Office Secretary of Defense, 2019). China possesses the largest navy force in the region including the domestically built aircraft carrier as well as the third largest aviation force in the world. (Office Secretary of Defense, 2019). The US is especially concerned with the situation in the South China Sea and Taiwan as China conducts aggressive policy there and strives to push the US out of the region. According to the Annual Report to Congress on Military and Security Developments Involving PRC, despite the decision of Law of the Sea Convention on the “nine-dash line”, “China continues to use coercive tactics, including the employment of PLA naval and paramilitary vessels, to enforce its claims and advance its interests”. The same report also skeptical about the “peaceful” unification with Taiwan without the use of military force. Thus far, tensions over Taiwan and Chinese claims in the South China Sea did note evolve recently and should be not be expected to serve as a trigger to direct military confrontation between China and the US as both countries retain strong military force and a largely deterred by the nuclear arsenal at the disposal of both. Neither US nor China would seek military cash with each other, in spite of that both are figuring out strategies to spread the influence in the region. Turning back to Liberman's analysis, the military confrontation caused by disproportionate economic gains in a multipolar world is expected to be low even between rivalry states, especially if both are nuclear-armed. The states would use other tools in order to adjust the gain balance to their favor.

The concerns over the issue of disproportionate gains with China did not appear suddenly with president Trump taking office. Over the past decades different administrations have been trying to contain growing China so that it would not pose threats in the future. Politicians in the US are divided into two camps in their affiliation towards measures to address China. Chan(2008) distinguishes the “conservatives” who do perceive China as a rival rising power and “liberals”. The conservatives advocate for containing measures in order to constrain Chinese growth and influence. Liberals, on the other hand, are for engagement policies aimed at including and softly undermining China trough norms established by the US in order to take control over it, which will eventually transform the political system of China. Chan (2008) admits that: “neither group, however, will endear itself to the Chinese because its explicit aim is either to block China's ascent or to undermine the current Chinese system”.The attitude towards China has been fluctuating from efforts to engage China into the US led system of international trade and politics during Obama administration to a more assertive policy of containment which is evident during the current presidency of Trump. Among challenges posed in the Asia-Pacific regions posed to the US are geo-economic and strategic. (Novikov and Shumakova, 2018). The reallocation of wealth in favor of China has led to a diminishing role the United States and loss of political dominance. Consequently, the US has been also losing the military supremacy and influence in the region. The aforementioned challenges have limited the strategic disposition as well as influence of the United States in the Asia-Pacific region and compelled the US to seek non-military foreign policy instruments including, as suggested by Novikov and Shumakova(2018). institution building. One of such institution was the Trans-Pacific Partnership (TPP), which was aimed at responding to both strategic and geo-economic challenges through involvement China into US led international order. Previous lack of involvement of the US in the development of trade standards in the region posed significant threats to the US influence. Preferential status of China in WTO, multiple bilateral Free Trade Agreements (FTA) with the key US partners in the region such as Japan, Taiwan and South Korea, as well as multilateral trade agreements not including the US, were undermining the US firm's competitiveness and clashed with the interests of the United states. (Salidjanova, 2015).

In order to keep control over the region, the institutional US dominated structure was needed, thus the TPP was to become one. The engagement attempts that were to be manifested through the TPP have failed to reach the desired containment through engagement of China as there were more drawbacks for the US than it could hold. A recipient of Nobel Memorial Prize in Economics Joseph E. Stiglitz was very critical of the TPP from the very beginning, arguing that not only does it not “check on the economic power of China”, but strengthens China's positions in the agreement where it already “has agreements with more than half of TPP partners” allowing for “substantial benefits via generous “rules of origin.” ” (Stiglitz, 2016).The withdrawal from the TPP was one of the first things the newly elected president Trump did, signifying the transition from the engagement to containment policy towards China.

The outbreak of the trade war between world's two largest economies certainly brings turbulence to the global economic and political environment. Given global economic interdependence, the imposition on tariffs brings global uncertainty and investment delays. The US has positioned aside from global trading regulations including the World Trade Organization (WTO) considering that it is “not well-equipped to handle the challenges posed by China's state-led economic system”), posing the world economy main stabilizing organization in a deep dispute-settlement crisis. (González &Véron, 2019).The decision of the United States to introduce national security tariffs on steel and aluminum caused discontent within members of WTO. Several members of the WTO including China, Russia and the European Union requested the WTO's Dispute Settlement Body (DSB) to examine the additional tariffs on steel and aluminum (25% and 10% respectively), but the requests were blocked by the US.(González &Véron, 2019). The tariffs hardly could be related to the issue of national security: “The Defense Secretary James Mattis the U.S. military requirements for steel and aluminum each represent only about 3% of U.S. production” (Brinkley, 2018). Such ignorance of the multilateral trade regulations which were previously pushed by the US, signified that under the current administration the “America First” is explicitly what it is. The measures that were undertaken were to hit the industrial sector and slowdown the Chinese economy, the reciprocal measures were fast to be implemented by China and even Russia destabilizing world trade and economy. October 2019 WTO press release mentioned that “escalating trade tensions and slowdown of global economy” have led the WTO to lower the trade growth forecast more than by half for 2019/2020. The global economic uncertainty caused by the Sino-US confrontation without doubt encourages third party states to be coming up with appropriate measures both political and economic. Russia, being situated amid US and China not only geographically, but also politically, and having strong economic ties with China, also is under threat and has to navigate cautiously both politically and economically.

2.2 Trade wars under Trump administration: theoretical perspective