Trends of U.S.-China Trade Disputes and Beijing’s Policy Options

Abstract

Although the intensified trade disputes between China and the United States accord with the basic theory of international political economy, they are unlikely to escalate into a trade war in a world characterized by the inexorable forces of globalization. What lies behind the Trump administration’s aggressive trade policy toward China is a bipartisan consensus on the growing need to reduce U.S. trade deficits, rein in China’s non-market economic forces, slow down China’s technological innovation and industrial upgrading, as well as to create political pressure on China to rectify its allegedly malign practices in global economic arenas. Motivation analysis suggests that the ongoing trade disputes are a product of the United States trying to coerce a potential challenger into adjusting its industrial development strategy and to prevent a determined rising power from pursuing national revival on its own terms. Lessons drawn from the trade conflicts between Japan and the United States in the 1980s suggest that Beijing may encounter even more trade frictions with Washington in the next few years. China must stand its ground under growing political and economic pressure, define trade disputes in strictly economic terms, and deal flexibly with their impacts. The lasting trade tensions between China and the United States has also exposed Beijing’s strategic shortcomings and forced China to enhance its innovation capacity while fostering independent intellectual property, so as to consolidate its comprehensive national power.