US-China trade war: What does it mean for global security?

As Washington and Beijing trade blows over tariffs and tech, old friends drift apart, new alliances take shape, and world order hangs in the balance.

The trade war has been described as “the largest commercial conflict in modern history”. | Photo Credit: istock/Rawf8

On May 14, US President Joe Biden dramatically announced tariff increases on several items imported from China. These new duties will affect electric vehicles, batteries, computer chips, medical products, steel and aluminium, critical minerals, solar panels, and cranes. Under the new orders, duties on electric vehicles have been quadrupled to over 100 per cent, while duties on semiconductors have been doubled to 50 per cent, and tripled for lithium-ion EV batteries.

The US administration has justified these tariffs by referring to “unacceptable risks” to US economic security posed by what it sees as unfair Chinese trade practices that, in its view, have led to China flooding the US market with cheap goods, thus harming domestic manufacturers and contributing to the trade deficit. In 2023, the US imported goods worth $427 billion from China, while its exports to that country were worth $148 billion.

China’s electric vehicles have been viewed with particular concern as an “existential threat” to the US automobile industry. Biden’s tariffs are meant to appeal to blue-collar workers and promote US manufacturing in the run-up to the presidential election.

The roots of the ongoing trade war lie in China’s emergence as a global economic power. China’s trade took off significantly after it joined the World Trade Organization in 2001: exports began to expand by 20 per cent annually, while GDP growth reached 14 per cent in 2007. But even then, China was still a minor presence in the global economy: the US GDP was 400 per cent larger than that of China in 2006. This began to change quickly: in 2006, China’s GDP in current dollars was $2.8 trillion; by 2017, it had become $12.2 trillion, with the US GDP now only 58 per cent larger than that of China.

Throughout his campaign for the 2016 presidential election, Donald Trump focussed on the US-China trade deficit as having caused the loss of American manufacturing jobs and its intellectual property. He said that China was responsible for “the greatest theft of the world” and described the trade deficit as the “rape of our country”.

In office, Trump began the trade war in July 2018 with tariffs on select Chinese exports to the US so that by August 2019 more than $450 billion of Chinese products were subjected to tariffs. The President said that China was costing the US economy hundreds of billions of dollars a year due to unfair trade practices. The items on which tariffs were imposed were solar panels, washing machines, steel and aluminium, and various consumer goods. These expanded to embrace the full gamut of China’s exports to the US.

Former US President Donald Trump began the trade war in July 2018 with tariffs on select Chinese exports to the US, a 2021 photograph.   | Photo Credit: Jim Bourg/REUTERS

In response, China asserted that the US’ real intention was to retard China’s economic growth and that US’ criticisms were speculative and without evidence. China imposed tariffs on more than $185 billion of US goods, including soya beans and other agriculture products, pork, and automobiles.

‘Largest commercial conflict’

This trade war has been described as “the largest commercial conflict in modern history”. However, its impact on the US has generally been negative. A report in September 2019 found that the US economy had lost 3,00,000 jobs and suffered a drop in GDP of 0.3 per cent to 0.7 per cent. The agriculture sector was particularly hit hard as US exporters lost access to the $24 billion Chinese market, with numerous job losses and housing foreclosures in rural areas.

The relocation of manufacturing production to its home territories to minimise economic and geopolitical risks is also something the US could not achieve. A survey by the American Chamber of Commerce in China found that China remained a top business destination for most of its members. The European Union Chamber of Commerce in China found that, despite supply chain disruptions due to the trade war and the pandemic, European companies remained committed to the Chinese market; two-thirds said that they ranked China among the top three investment destinations, especially in sectors such as petrochemicals, chemicals, and refining.

Power rivalry

Great power rivalry is now at the heart of contemporary US-China ties, with trade issues joining geopolitical competition as areas of bilateral contention. In terms of the size of the economy, China’s GDP at current prices in 2021 was $16.4 trillion, while that of the US was $22 trillion; in 2030, China is expected to surpass the US, when its GDP will be $33.7 trillion, while that of the US will be $30.4 trillion.

China’s rise to great power status is the most significant political and economic development of the present century, with implications for global security and global governance; it in fact poses a challenge to the US-led world order. This is reflected in China’s high-profile global geopolitical presence and its more assertive posture in projecting its interests; this is particularly evident across the west Pacific and its expanding footprint in the Indian Ocean. But China’s ambitions go beyond this: in the Foreign Affairs issue dated May-June 2024, the political scientist Elizabeth Economy asserted that President Xi Jinping’s ambition “to remake the world is undeniable”.

Elizabeth Economy also correctly points out that China is not alone in wielding this challenge; she notes that “China’s proposals would give power to the many countries that have been frustrated and sidelined by the present order, but it would still afford the states Washington currently favours with valuable international roles”. Thus, what China and several other like-minded states are seeking is not to replace one hegemon with another or set up a new global binary of states in contention. They are seeking a new multipolar order in which diverse states assert their interests and seek to influence issues being discussed at global fora, besides forming new alignments among themselves to pursue their interests.

But this encroachment on its pedestal is not acceptable to the Western alliance; it views with serious concern the political and economic challenges it faces from states that it had dominated and ruthlessly exploited for two centuries. From the Western perspective, the threat of a new world order is the principal narrative of contemporary international politics.

As the US shapes its coalition to confront the challenge from China and its allies, it views India as a valuable partner and is making every effort to lure India into its alliance.

The Automated Material Handling Systems robots moving along tracks on the ceiling inside the GlobalFoundries semiconductor manufacturing facility in Malta, New York, US, on June 18, 2024. | Photo Credit: Cindy Schultz/Bloomberg

Over the past 20 years, India has been a robust advocate of a new multipolar world order in which international institutions, shaped by the West in the aftermath of the Second World War, are thoroughly reformed and countries of the “Global South” are given an influential voice in articulating and pursuing their interests. The approach that India adopted after the Cold War was that of “strategic autonomy”, that is, pursuing a wide variety of bilateral and multilateral engagements that would serve its interests and enable it to voice the concerns of the developing world.

Over the past decade, India has also noted with concern China’s expanding presence and influence in areas of crucial importance to its strategic concerns: South Asia, the Indian Ocean, and Eurasia. But of immediate concern for India is what it sees as steady Chinese encroachments along its 4,000 km undemarcated border. The most serious confrontation in recent times has been the massing of Chinese troops in Ladakh from April 2020. A confrontation between Indian and Chinese soldiers in June that year left 20 Indians, including a colonel, dead, along with an unknown number of Chinese soldiers. Since then, the two countries have massed about 50,000 troops each, facing each other at the frontier.

This cross-border confrontation, coupled with increasing Chinese activity in the Indian Ocean, has encouraged greater Indo-US strategic cooperation. The two countries have signed four agreements providing for the interoperability of their armed forces; these cover the areas of security, logistics, communications, and compatibility. India has also increased its purchase of US defence equipment, enhanced intelligence cooperation, and institutionalised these relations through the annual 2+2 dialogue platform that brings together the Foreign and Defence Ministers of the two countries, even while holding regular interactions at the summit level.

Despite this dramatic progress in bilateral ties, India has retained its strategic autonomy: it has refused to join the Western countries in imposing sanctions on Russia for the war in Ukraine. It has maintained a high-level of bilateral cooperation with Russia in defence and economic areas and, following the energy embargo on Russia by Western nations, has become a major buyer of Russian oil. It also actively participates in fora such as BRICS and the Shanghai Cooperation Organisation that include China. External Affairs Minister S. Jaishankar has categorically stated that multipolarity is “the natural state of the world”. 

The US, on its part, does not seem to be deterred; it sees the cultivation of ties with India as a long-term process. Part of this process is to draw India into regional US-led organisations which would deepen India’s engagements with the US and its allies and encourage the habit of working together.

Highlights

• China’s trade took off significantly after it joined the World Trade Organization in 2001: exports began to expand by 20 per cent annually, while GDP growth reached 14 per cent in 2007.
• In terms of the size of the economy, China’s GDP at current prices in 2021 was $16.4 trillion, while that of the US was $22 trillion; in 2030, China is expected to surpass the US, when its GDP will be $33.7 trillion, while that of the US will be $30.4 trillion.
• What China and several other like-minded states are seeking is not to replace one hegemon with another but to put in place a new multipolar order in which diverse states assert their interests and seek to influence issues being discussed at global fora.

India and the West

The first of these regional organisations is the Quadrilateral Security Dialogue, or Quad, that brings together the US, Japan, Australia, and India as a maritime coalition in the Indo-Pacific. From early 2021, amidst the ongoing Sino-Indian confrontation, Indian and American commentators began to highlight the Quad’s security agenda vis-a-vis China. But this enthusiasm did not last. A conscious course correction was affected at the in-person summit in Washington, DC, in September 2021. The security element in the Quad was diluted and replaced with a focus on cooperation in areas of long-term interest such as the COVID-19 vaccine initiative, the Quad Stem fellowship, a cybersecurity initiative, green shipping, a clean-hydrogen partnership, 5G deployment, and a semiconductor supply chain initiative.

Besides the Quad, the US has initiated two other regional organisations that are principally aimed at affirming the US’ continued interest in West Asia, gradually integrating Israel into the West Asian political and economic dynamics while pulling India deeper into the Western alliance.

The first one is the so-called I2U2 that includes the US, Israel, the UAE, and India. This new partnership has been described as an “ad hoc, informal, issue-specific and geo-economic initiative”, highlighting that the partners have no shared strategic vision and, hence, have no agenda in the area of regional security. While building on close political and economic ties among the partners, the grouping is focussing on non-security areas such as energy, food security, health, space, transport, and water.

The second entity sponsored by the US is the India-Middle East-Europe Economic Corridor, or IMEC. This logistical connectivity project links India with the Arabian Peninsula and, further, connects the peninsula with Europe through railway links from the UAE and Saudi ports with the Israeli port of Haifa. This proposal was agreed to on the sidelines of the G20 summit in New Delhi in September 2023.

However, the project has serious limitations. India is already well-connected with the Arabian Peninsula; in fact, these ties go back nearly five millennia. Again, India and all Asian countries are closely linked with Europe through the Red Sea, with the Suez Canal providing the East-West passageway for global shipping. This is a bizarre proposal given that we now have direct shipping links from Asian markets to Europe and vice versa. A far better way to integrate Israel with its neighbours in West Asia would be for Israel to accept and implement the Arab Peace Initiative and facilitate the realisation of a sovereign Palestinian state.

Both India and the US have found technology as a substantial and mutually beneficial area for bilateral cooperation. The commentators Hemant Taneja and Fareed Zakaria wrote in April last year that as US concerns relating to China grow, “India shines as a promising alternative in supply chains, innovation hubs, and joint ventures”.

Chinese President Xi Jinping and US President Joe Biden at Filoli estate on the sidelines of the Asia-Pacific Economic Cooperation summit, in Woodside, California, in November 2023.  | Photo Credit: Kevin Lamarque/REUTERS 

In November 2022, visiting US Treasury Secretary Janet Yellen affirmed that the US was placing India at the centre of its efforts to detach global supply chains from its adversaries and cement ties with one of the world’s fastest growing economies and trusted trading partners—India. The areas of cooperation identified were semiconductors, electric vehicles, artificial intelligence, quantum computing, and drones.

In March 2023, US Commerce Secretary Gina Raimondo was in India for a “Strategic Trade Dialogue” on a matter of vital strategic importance to the two countries in their competition with China—semiconductors. The two countries are also looking at jointly developing defence technologies, including jet engines, artillery systems, and armoured infantry vehicles.

Building strategic trust

Although much progress has been made in exploring areas for bilateral cooperation in the technology sector, both the US and India have some way to go in building strategic trust: India complains that it is still being denied access to some advanced US defence-related technologies. Taneja and Zakaria have recommended that the US should see India as a genuine hub of innovation and work towards reforming trade policies and creating a transparent system for technology transfer and innovation. India, on its part, needs to become more business-friendly by reforming its laws and easing barriers to foreign investment.

Despite these diverse and substantial engagements with the US, India remains wedded to strategic autonomy. The latest evidence of this is the signing by India and Iran of a 10-year contract for India to provide funding of $120 million and a further credit line of $250 million to develop the Chabahar port project. The project envisages the construction of 32 jetties that, when completed, will handle 82 million tonnes of cargo annually.

The origins of the US-China trade war, which has evolved into ongoing zero-sum Sino-US technological and geopolitical competitions, lie in the rise of China and its second place, just afiter the US, in the present-day global economic, political, and military order and its affiliation with Russia (as also Iran and North Korea) that enables it to challenge the US-dominated world order with the alternative vision of multipolarity.

Western states, however, view their hegemony over world affairs as natural and, possibly, eternal; hence, threats have to be confronted unitedly and vigorously, with diverse instruments: trade war, economic sanctions, subversion, and direct military interventions, where required. Undermining foes through carefully calibrated and implemented divide-and-rule policies is an important part of this confrontation.

The West has shaped itself and its enemies as two collective binaries in contention, with its understanding of “us” and “them” being founded on the simple view that if you are not with us, you are against us. But this understanding is erroneous since those who challenge Western hegemony are not and do not see themselves as a monolithic collective; they are numerous and diverse nations that today are seeking an autonomous role for themselves in world affairs so that they can, either on their own or in tandem with like-minded allies, assert their interests in specific geographies or on specific issues. Thus, what they are seeking is a multipolar order, not another global binary divide.

India seeks to safeguard its interests, enhance its capabilities, and voice the concerns of the Global South through exercising strategic autonomy and joining diverse alignments, bilateral and multilateral, ensuring always that it does not function at the behest of another authority or subordinate its interests to serve another power. India sees itself as a player, even influencer, in the emerging multipolar order. 

Talmiz Ahmad is a former Indian Ambassador to Saudi Arabia, Oman, and the UAE. He holds the Ram Sathe Chair for International Studies, Symbiosis International University, Pune. His book West Asia at War: Repression, Resistance and Great Power Games was published by HarperCollins in April 2022.