When President Donald Trump accused China of backtracking on promises made during trade war negotiations and then increased US tariffs on $200 billion of Chinese goods, he also increased the risk that the US-China conflict will continue for many months – perhaps even through the US presidential election next November.
But the trade conflict, whenever it ends, has permanently undermined trust between the two governments. And the growing rivalry between them will center on issues more consequential than the flow of consumer goods.
The current fight could be closer to resolution than we think. It’s possible that Trump’s latest move is a negotiating ploy designed to push a deal across the finish line. As a businessman and as president, he’s made a habit of striking an aggressive pose to push his target onto the defensive before offering a seemingly magnanimous compromise.
He could be trying to increase his leverage to force final concessions on controversial questions, such as state subsidies that give Chinese companies a competitive advantage, the practice of forcing foreign companies to share technologies in exchange for access to Chinese markets, cybertheft of intellectual property, Beijing’s willingness to write its concessions into Chinese law, and to create a system that ensures China is keeping its promises.
Expanded access to the Chinese marketplace
But it’s also possible that Trump’s more hawkish advisors, led by lead trade negotiator Robert Lighthizer, have persuaded the president that the current deal isn’t tough enough, and that short-term pain created by new tariffs will yield long-term gain. Signs of a strong US economy is probably reinforcing Trump’s confidence that an extended trade conflict with China is a war he can win.
Eventually, China’s President Xi Jinping will offer Trump some of what US negotiators want most. His likeliest victories will include expanded access for US companies to the Chinese marketplace, agreements on currency management, more Chinese purchases of American soybeans, and promises in principle to address other US demands.
But Trump cannot persuade Xi to fundamentally compromise China’s economic model. Beijing knows that Chinese companies need every competitive advantage their government can offer if they are to become global players, and capacity for technological innovation will be crucial for 21st century prosperity.
China will continue to subsidize state-owned companies and privately-owned national champions, tilting the international competitive playing field in their favor. It will continue to develop its capacity for technological innovation to compete with US and European firms in the most important economic sectors of the 21st century. On these subjects, in particular, whatever Xi promises Trump or Chinese officials say publicly, they will not compromise.
There is also a political logic to Xi’s refusal to bargain away crucial parts of his economic plan. Xi has accumulated enormous power within an authoritarian system, and any public show of weakness is even more dangerous for him than an economic slowdown. This is mainly because potential threats to his leadership come not from unemployed workers but from others within the elite. Xi may also believe that if he can keep talks going through the next US election, a possible change in the White House will provide China with a less aggressive negotiating rival.
Relations are fundamentally broken
Here's the more important point: Whenever Presidents Trump and Xi shake hands on a final deal, it’s already clear that relations between the world’s established and rising power are fundamentally broken. Trust between Washington and Beijing has reached its lowest point in 30 years, and each government will continue a long-term project of making its side less vulnerable to pressure from the other. Just as an international financial crisis that began in the United States a decade ago proved to China’s leaders they must increase the pace at which they shift China’s economic engine from one powered by sales of consumer goods to the US, Europe, and Japan, so Trump’s show of strength has underlined the dangers of a relationship that depends too heavily on economic interdependence with the US.
There is little doubt that the US-China will create pressure on Europe. An emerging „Tech Cold War“, in which the US and China will each work to ensure that its rules and standards carry the day in development of 5G communications technologies, will force EU countries to side with Washington to protect rule of law and consumer rights against China’s use of data to protect its authoritarian political model.
Yet, China’s trade with and investment in Europe already surpasses America’s in many areas, and countries that are increasingly reliant on Chinese investment will be reluctant to comply with the broader EU regulatory approach to the tech sector, opening another important divide in EU politics that undermines Europe’s global influence.
How should Europe respond? Frustration with Trump aside, there is no third way in technology development, and European governments have every reason to protect core EU values by working toward a common Western strategy to China’s more authoritarian approach to information and data. Brussels, and Berlin, have every reason to push back against Trump administration policies on Nato, trade, Iran and many other issues, but that should not block close EU-US collaboration on technology where it matters most for individual liberty, freedom of speech, and democratic values.
Europe is not simply a junior partner in this project. The EU’s regulatory authority gives it real power to shape the future of communications technology, and a US-European partnership is the most effective solution to the problem of state control of data as a tool of authoritarian control.
Ian Bremmer is the president of Eurasia Group and GZERO Media and author of Us vs. Them: The Failure of Globalism.