Your Reading List

Opinion: U.S. and China stumble into Thucydides Trap

The United States and China have fired the opening shots in a trade war that may be hard to stop.

The United States has appeared eager to impose tariffs to create leverage and force China into concessions on the bilateral trade deficit, intellectual property protection and forced technology transfer.

For its part, China has appeared anxious to avert a trade conflict but threatened a proportionate response to U.S. action.

Both sides have been careful to leave time for further negotiations. Most investors still seem convinced a last-minute deal can be reached.

Trade wars, however, are like real wars in that they are easy to start, but, once underway, the course is unpredictable.

As a result, trade war between the United States and China must be seen as one of the biggest risks to the global economy and commodity prices.

Neither Trump nor Chinese President Xi Jinping can afford to be seen to lose or make many concessions.

Trump made trade a central plank of his presidential campaign. Fair trade and dealing with China’s perceived abuses is an important issue for the U.S. president’s core supporters.

In China, Xi has just been re-elected as Communist Party chief and had the constitution changed to allow him to extend his tenure as president based largely on his promise of strong leadership.

Like a real war, the trade measures announced by both sides are largely for domestic political consumption.

Behind the scenes, both sides are trying to negotiate a settlement.

There are plenty of possible options to settle the dispute. The problem is that any compromise must allow both sides to save face.

Both sides are likely to come under business and economic pressure to de-escalate, avoiding a major disruption of global trade.

But with the domestic political credibility of the leaders of both countries now on the line the scope for a climb-down has narrowed.

The trade conflict is really just one aspect of the increasing competition between the United States and China.

The United States wants to maintain its military, diplomatic and economic superiority over all other countries while China is determined not to accept second place and to achieve parity.

The problem has been termed the Thucydides Trap, after the conflict in ancient Greece between Sparta (the incumbent superpower) and Athens (the rising superpower) that led to the Peloponnesian War.

The problem of how to manage the rising power of China and its challenge to the superiority of the United States has been evident for two decades.

China has appeared anxious to avoid the problem, and the government-run Xinhua news agency has published numerous articles on averting the Thucydides Trap.

Even with this level of awareness, however, the two countries have already blundered into it on trade.

There are compelling economic reasons for the United States and China to avoid imposing extensive tariffs on bilateral trade, but both sides face tricky domestic political constraints.

John Kemp is a Reuters market analyst. The views expressed are his own.

About the author



Stories from our other publications