by Michael Krieger
President Trump has said many times,
we rebuilt China
over the past 25 years.
No truer words
were spoken, but those days are over.
The United States now recognizes China
as a strategic
and economic rival.
President Mike Pence
a speech last week at the
International Center for Scholars
The truth is that China is a strategic competitor at best
coercion and corruption as its tools of statecraft. (Applause.)
We've reconvened "the Quad" - the security talks between
Australia, India and the Untied States
that had been
dormant for nine years.
This will prove
very important in the efforts ahead,
China retains only its proper place in the world.
of State Mike Pompeo
a speech last week to the
I don't take the U.S.-China
trade war seriously, because I
don't expect a transformative deal to come of it.
Specifically, I see the
current trade charade as little more than a warm-up to a far more
serious, unpredictable and dangerous conflict between the U.S. and
China in the years ahead.
Last December, in a piece titled
Is U.S. Geopolitical Strategy Experiencing a
Monumental Shift?, I
explained how the U.S. was repositioning its foreign policy to focus
on China, and how this would set off a long-lasting and enormously
consequential feud between
the dominant empire and
The post concluded with
the following thought:
I've now seen enough
to seriously consider that we may be entering an entirely new
geopolitical environment dominated by vastly increased tensions
between the U.S. and China.
If so, it will likely
last a lot longer than you think as leaders in both China in the
U.S. will be looking for a scapegoat as their crony,
financialized economies struggle under unpayable debt and
unimaginable levels of corruption.
It's been close to a year
since that was published, and I'm now more convinced than ever what
we're witnessing with the trade war is nothing more than insincere
negotiations with virtually zero chance of resulting in a major deal
that fundamentally restructures the U.S.-China relationship.
Despite the endless
rounds of talks and optimistic tweets from
Trump, absolutely nothing
has been accomplished.
Let me explain what I think is really going
First, I think Trump and
his administration genuinely mean it when it comes to their desire
to get China under control and stymie its geopolitical and economic
This has been clear from
the very beginning, and continues to be expressed by top
administration officials including by Mike Pence and Mike
Pompeo in a set of speeches last week (here
here), which I encourage everyone
to analyze independently.
In his speech, Pence harshly attacked virtually every aspect of
Chinese society and referred to it an "authoritarian regime" on
This isn't the sort of
language U.S. officials tend to use when a breakthrough deal with a
foreign nation is imminent:
it's the sort of language U.S. officials
use when the country is at war, about to be at war, or is working on
a regime change operation.
If that's the case, why do both China and the U.S. continue to play
pretend when it comes to the trade war?
I think there are several
Let's begin by examining
what Trump's trying to achieve.
I think he went into
the trade war thinking that by taking an unexpectedly aggressive
approach he could inflict enough pain on China's economy to
force them into the sort of historic and transformative deal he
had in mind, but this did not pan out.
I believe Trump now
recognizes such a deal will not happen, but he continues to fake
This isn't because his fundamental strategic objectives
changed, it's because he's consumed with concerns around
As such, he's decided
to pretend things are going well regarding a trade deal he knows
isn't coming to keep the stock market elevated.
Trump is absolutely
obsessed with the U.S. equity market and believes keeping it
elevated is key to his reelection.
Thus, he's intentionally
keeping hope alive when there's no real reason to be hopeful.
As I noted a couple of weeks ago:
Subsequent days offered additional evidence for this perspective as
Trump proclaimed the trade deal would be separated into phases, with
phase one pretty much ready to go.
Naturally, if you look
into what's expected to be accomplished in "phase one," it's a
As noted in the Bloomberg article, it appears phase one will amount
to a complete zero from the U.S. perspective.
China aims to buy at
least $20 billion of agricultural products in a year if it signs
a partial trade deal with the U.S., and would consider boosting
purchases further in future rounds of talks, people familiar
with the matter said.
That would take China's imports of U.S. farm goods back to
around 2017 levels, before Trump began a tit-for-tat tariff feud
In the second year of
a potential final deal, purchases could rise to $40 billion to
But that would depend
on Trump removing remaining punitive tariffs, said the people,
who asked not to be named because talks are private.
If this is accurate, it
accomplishes absolutely nothing.
It simply brings
Chinese purchases back to where they were before...
Even if they agree to
much higher purchases, this was never about China buying more pigs
it was about fundamentally restructuring the
U.S.-China relationship, and there's no evidence whatsoever this is
going to happen...
Trump is dragging this
out and pretending it's going well in order to,
keep the stock market
at record levels to help his reelection odds...
Other more significant
trade phases will be discussed ad nauseam for the next twelve
months, but no truly transformative deal will occur.
Trump knows this and so
If I'm right and China's leadership understands the sort of deal the
Trump administration demands will never happen,
why are they willing
to play along with Trump's trade song and dance?
I think the primary
motivation lies in China's hope Trump can be removed from office,
either via impeachment or in the 2020 election.
probably thinks escalating the situation could end up helping Trump.
Though a fall in equity markets and U.S. economic activity wouldn't
be good for Trump, if he's able to blame it on China's unwillingness
to compromise it could actually help his reelection prospects.
I think the Chinese
understand this and don't want to offer Trump the scapegoat he
They figure the U.S.
economy and markets could very well stumble on their own over
the next twelve months, and they want the U.S. populace to blame
Trump instead of China.
Trump went into the trade war thinking he could cause such a massive
headache for China it would swiftly agree to major concessions.
When this didn't happen,
Trump figured he couldn't safely escalate into a more aggressive
confrontation without torching his reelection prospects, so he
decided to drag out this ridiculous spectacle to prop up the stock
market into November 2020.
From its perspective,
China doesn't want to give Trump the scapegoat he desires should the
economy and stock market tank before the election. Chinese
leadership probably thinks there's a reasonable chance Trump's days
are numbered and they might get a China softie like Biden in the
As such, both the Trump
administration and China both appear to have their own distinct
incentives for pretending that the trade war negotiations are
going 'well,' when in fact both sides know they are not.
If I'm correct, there's no point in spending much time thinking
about the trade war.
It's just a
spectacle, a sideshow and a total circus at this point...
Rather, it's much more
important to think about where this is all headed over the next
several years, and on that front I think the conflict will get far
If Trump wins in 2020, I expect he'll become more aggressive with
China than almost anyone can imagine.
Without having to think
about reelection, Trump will focus on his legacy and he'll see reorienting the U.S.-Chinese relationship as the most historically
significant achievement he can accomplish.
At that point, China will
have have no choice but to face the reality of another four years of
Trump, and it'll likewise stop pretending things are going well,
which will cause the situation to deteriorate fast.
The path is a bit less clear should Trump lose reelection, though a
major U.S.-China conflict remains in the cards early next decade
regardless for a couple of reasons.
First, the global
economy is in fact on the verge of systemic failure due to it
being structurally little more than
a massive fraud scheme of
debt, corruption and rent-seeking.
When this failure
truly manifests globally, both Chinese and U.S. leadership will
desire a conflict in order to distract from internal problems.
elites won't want
the Chinese people to blame them, and U.S.
elites won't want to be
As such, an external
enemy works for politicians and oligarchs in both countries...
It's the same as it ever
Trump's just escalating
and bringing forward a collision that's increasingly likely to
unfold irrespective of who resides in the oval office.