With the United States and China preparing to restart trade negotiations in October, the operative question for President Donald Trump remains whether China will risk mortal economic wounds to defeat the United States. Since the beginning of the trade war, the White House has assumed that it isn’t. Trump, for example, has declared, “I think they [the Chinese leadership] wanna make a deal, and I think they should make a deal, and I think if they don’t make a deal, it’s gonna be very bad for China.”
More than a year since the trade war started, Trump and Chinese president Xi Jinping are still locked in a bruising feud, with no signs of China surrendering. Larry Kudlow, who directs the U.S. National Economic Council, is adamant. "The economic burden of these tariffs is falling most heavily on China,” he says. “probably by a factor of 4 to 1 or 5 to 1." Yet no movement from Beijing. So where’s the Trump administration gone wrong? The answer: For China, the trade war is less about economics—and more about politics.
It’s no secret that China has long eyed rivaling the United States politically. That demands it alter the relative balance of power with the United States, regardless of whether—in the short term—it erodes its own absolute strength economically. For years, China hesitated to make that play. Its economy was too vulnerable and too dependent on the U.S. market. No longer. With the capacity to diversify its export portfolio, Xi sees an opening. The trade war presents an opportunity to apply maximum pressure to its rival.