Why the U.S.-China trade war could be long and painful: no offramps
Just two weeks ago, the United States and China seemed to be gliding toward a trade deal meant to resolve tensions between the world’s two largest economies.
But the breakdown in talks since then — including the United States raising tariffs to 25% on $200 billion of Chinese imports and threatening to tax an additional $300 billion — worries people who study international economic diplomacy.
That’s because both the United States and China seem to be digging into their positions in ways that will be hard to resolve with the kinds of mutual face-saving that typically turns high-stakes negotiations into deals.
To use a common negotiating metaphor, it is not clear what the offramps are that might allow a de-escalation and prevent a major trade war that would prove costly to both nations.
In effect, President Donald Trump appears to view continuing tension with China as good for him politically and has said, contrary to the view of mainstream economists, that tariffs are a reason for the United States’ recent economic good fortune.
China’s leaders may not reveal their thinking in real time on Twitter, but they have signaled that many of the concessions the United States wants would require China to sacrifice core parts of its economic strategy and national sovereignty — in particular its ambitions to lead in the high-tech industries of the future.
“Each side has dug itself into some fairly deep holes such that it will be difficult to emerge from,” said Douglas Rediker, chairman of International Capital Strategies and a former U.S. representative to the International Monetary Fund. As is often the case in negotiations, the pathway to a deal may rest in “constructive ambiguity” that both sides can present to their domestic audiences as a win.
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