An Emerging Cold War Could Spell Economic Catastrophe if Politicians Fall Victim to the Repetition of History
When the Cold War took center stage as the international community’s most concerning hostility, the bilateral economic connections between the two world powers were fairly easy to understand. Despite the numerous complexities of proxy wars and competing spheres of influence, the Soviet Union and the United States had little economic and trade relations with one another. From an American perspective, sanctioning Khrushchev, Brezhnev, or Gorbachev did little to incur self-inflicted economic damage. But as the world watches a new emerging power rapidly challenge American hegemony, one can only help but think that the economics of this new cold war will be much different.
The United States and China are not economically severed from one another. There is no McCarthyist blacklist preventing Chinese citizens from obtaining work in the United States, at least as of now. And there are far more countries who choose to engage economically and diplomatically with both world powers, unlike in the past when some nations had binary choices between adhering to the Truman Doctrine or engaging in Soviet relations. This new, globalized landscape could set the stage for a far uglier economic confrontation between the two world powers. Chinese-American trade operations total over $700 billion on an annual basis, and tariffs imposed on Chinese products stoke reciprocal fees on American goods, impairing the financial health of producers in each country.
Using an economic simulation model, Moody’s Analytics reported that roughly 300,000 American jobs were lost over a one year period because of the trade war (Lobosco). Though Americans saw a net job expansion over that same period, our domestic rate of growth could continue to decline amid growing confrontations. With tensions only set to escalate between the two countries and their respective neighbors, economic deterioration at the hands of political strife will only be exacerbated. Distancing ourselves from China may prove to be much harder than we initially thought, and politics may become our world economy’s most concerning enemy.
Barring a Joe Biden election victory, there is little reason to believe that relations with China will fundamentally improve. The Phase 1 trade agreement enacted by the Trump administration fails to properly address many of the same issues that strained relations in the first place, and China’s commitment to increasing American imports of agricultural products still raises many questions (Eavis). Will American farmers become too reliant on temporary Chinese demand? Will China sever agricultural trade with American allies to accommodate the shift, further driving a wedge between the United States and its friends? How long will it last? China’s Vice Premier indicated that the acquisition of American imports will be subject to his nation’s market demand, roughly implying that the agreement is merely a guideline rather than a stern requirement.
Some experts also point out that many of the clauses are redundant reconstructions of past promises made by the Chinese government, and in this case, more vaguely worded than before. The deal also does not discuss data collection, an issue that was set to be addressed in future negotiations that seem to be indefinitely suspended amid tension stemming from the pandemic.
Could there be any signs of hope? Perhaps. Biden tends to be far less antagonistic and abrasive than the current president, signifying a potential calming of tensions if he were to assume office. But public opinion of China has shifted since his days as vice president, and the general consensus in Washington is that the emerging superpower must be tamed. While Biden will likely be the right choice in avoiding excessive escalation with Beijing, he’ll need to carefully balance his prudent approach with the urgency necessary in garnering tangible results in Chinese relations.
Even in the event of a Joe Biden presidency, the Trans Pacific Partnership (or a renewed version of it) could be back on the table, an agreement that would gradually set the stage for economically isolating China from its neighbors and regional partners, and set the stage for once again choosing sides between the two world powers. Only this time, having Southeast Asian countries sever ties with China could spell massive economic recession, while eliminating relations with the United States could create deepened issues in security interests.
The totality of these circumstances leads to a perfect storm. For better or for worse, history repeats itself, and history has shown that anytime an emerging power challenges the hegemony of an already powerful nation, conflict typically ensues. With nuclear deterrence playing a role in relations, a potential conflict between China and the United States might not materialize through a conventional war, but through economic or cybersecurity escalations. Today, our focus is on the coronavirus-induced recession. In five years from now, it may very well be the economic fallout of history’s next Cold War, but it doesn’t have to be that way.
When writing about Neville Chamberlain’s lack of intervention in emerging Nazi Germany, Winston Churchill observed that “unwillingness to act when action would be simple and effective, lack of clear thinking….until self-preservation strikes its jarring gong” are “the features which constitute the endless repetition of history.” Now some 80 years later, we don’t have to fall victim to the redundancy of history. The United States and China have a host of issues to address, but tribalism, nativism, and countless other sources of polarization don’t need to drive us further from the negotiating table, and too many lives have been lost throughout human history for these two world powers to wage economic war while the instruments of peace sit idly on the table.
It would be a crime against humanity for political strife to cause needless human suffering.
Written By Andreas Papoutsis, Undergraduate Economics Student
Lobosco, Katie. “Breaking down the Costs of Trump's Trade War with China.” CNN, Cable News Network, 14 Jan. 2020, www.cnn.com/2020/01/14/politics/cost-of-china-tariff-trade-war/index.html.
Eavis, Peter, et al. “What's in (and Not in) the U.S.-China Trade Deal.” The New York Times, The New York Times, 15 Jan. 2020, www.nytimes.com/2020/01/15/business/economy/china-trade-deal-text.html.