For all the economic rivalry and political disagreement between the United States and China, a catastrophic outcome is unlikely, so long as the USA faces reality in three ways. Above all, Americans should recognize that trying to defeat or contain China economically will not solve their problems at home.
The agreement in Buenos Aires last December between U.S. President Donald Trump and his Chinese counterpart, Xi Jinping, led many to assume that the two countries’ trade war would soon be over. Although such optimism is misplaced, so are fears of a global economic meltdown caused by a rupture in U.S.-China relations. Frequent bilateral skirmishes will no doubt continue, as we saw with the arrest in early December of Huawei CFO Meng Wanzhou. But for all the economic rivalry and political disagreement between the United States and China, a catastrophic outcome is unlikely, so long as the USA faces reality in three ways.
First, U.S. policymakers need to accept the “new normal” of a China that boasts the world’s largest GDP (in purchasing-power parity terms). Just as the USA was the largest economy in the twentieth century, China will be in the twenty-first. But, under any scenario, America will of course remain a major economic power.
Second, the USA must acknowledge the need for structural economic reforms at home, just as China did four decades ago, albeit with a very different focus and trajectory. Rather than blaming its huge trade deficit on other countries’ supposedly unfair trade practices, the USA should consider its own unsustainable economic policies, deteriorating industrial capacity, and insufficient investment in infrastructure, education, and training. If U.S. policymakers keep focusing on pleasing Wall Street, big business, and neo-liberal economists, then the country’s economic performance will suffer and wealth inequalities among Americans will continue to widen. This, in turn, will raise the risk of further social instability, extremism, and populism. U.S. elites cannot afford to ignore obvious warning signs in the same way they overlooked the subprime mortgage bubble that triggered the 2008 financial crisis.
Third, and finally, America needs a better understanding of China’s geopolitical outlook and intentions, an area where incorrect assessments may lead to unnecessary conflict. Although Western theories of international relations predict that China’s economic strength is bound to turn it into a dominant global power, the country’s history suggests otherwise.
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