Bhopinder Singh | Is China’s Xi In a Better Position To Win Round 2 of US Tariff War?

America’s President Donald Trump wants to win the ensuing trade/tariff war for popularity, while for China’s President Xi Jinping, it is a matter of survival -- for himself and for the ruling Communist Party of China (CPC). A lot of Chinese investments have gone into institutionalising the neologism of “Zhongguo Shiji”, or the “Chinese Century” (21st century), into the consciousness of Chinese citizens. The consequential socio-economic benefits for the Chinese masses, emotional pride, and the obvious infrastructural transformation, has traded and “bought” stability and legitimacy for the CPC. While the optics matter for both sides, for a single-party dictatorship in China, reneging or seemingly compromising over the ongoing stakes in the trade/tariff war, are next to impossible. Actions borne out of the regime survival impulses will always be heavier than a generic aspiration like “Make America Great Again”. President Trump will have over three and a half years to “deal” (such as backpedal and dishonour his own statements), but not so for President Xi. This fine difference will always breed a sharply differentiated instinct and reaction from Beijing vis-a-vis Washington DC.

So, while many countries have quietly acquiesced to Mr Trump’s bullying and have been working in parallel on bilateral agreements with the United States (including India), China has given it back in equal measure to the Americans. If Mr Trump initiated the “dare” with 54 per cent tariffs on imports from China, only to rachet up the same eventually to 245 per cent; the Dragon fumed with its own retaliatory fire with tit-for-tat tariffs which went up to 145 per cent on American goods. Not to be cowed down, China’s commerce ministry did some plain speak of a looming “fight to the end”. Clearly, Mr Trump’s initial gloating -- “These countries are calling us up, kissing my ass. They are dying to make a deal. ‘Please, please, sir, make a deal. I’ll do anything. I’ll do anything, Sir” -- did not include, or cut any ice, with the Chinese.

So, who blinked first? Yet again it was the Trump administration which made a thawing concession within days to exempt smartphones, computers and semiconductors in order to allay the fears of US corporations and consumers of spiralling prices. To rub salt, the Chinese slammed the meek correction as a “small step”. Presumably, the all-powerful corporations from the United States would have played an invisible but invaluable role in explaining the commercial price of Mr Trump’s reckless bravado via “Liberation Day”. Calling the bluff of the US move, China’s unofficial mouthpiece Global Times noted: “Whether dealing with allies or what it deems rivals, it has long preferred to measure others by rules that the US alone established, to cloak power in the guise of values, and to use sanctions as a cover for the absence of true equality in negotiations”.

Ironically, it is a sentiment that will get silent concurrence from traditional allies of the US like the European Union, Britain, Canada or even India.

An important consideration to hold ground in a tariff/trade war is the extent to which the popular mood can be managed with the presence of the media, inflationary trends, and Opposition groups.

On all three scores, China is better placed to withstand pressure. There is no “free press” in China, and as the narrative-building machine is entirely in governmental hands, the masses are more accepting of hardships, and there are literally no Opposition groups to galvanise the mood against the government. This leads the obviously impacted Chinese masses to treat the downturn as a strategic and nationalistic challenge, as opposed to Americans, who will view the hardships as an economic crisis. Unsurprisingly, despite the initial support for Mr Trump’s “muscular” approach among his core constituents, Mr Trump’s approval ratings have plummeted by around 10 per cent in less than two weeks with talk about recession, the bond market crash and inflation gaining credence. Even within the ranks of the Republican Party, there is a wariness with Mr Trump’s approach of Trump, which is unsettling for Mr Trump himself. Obviously, the similarly hurt Chinese economy is better placed to absorb the negative economic impact, given the presence of almost all “control levers” in the hands of Mr Xi and the CPC. This crisis affords Mr Xi the opportunity to spin the situation towards a mission of national pride, rejuvenation and “decisive battle” against its deserved destiny.

Over the years, Mr Xi has successfully conflated the twin pillars of nationalism and economics to stitch a unique Chinese storyline, that pits the United States as a reactionary villain. Pivoting towards nationalism to explain the current “temporary economic hardship” will have traction, given the combination of undeniable economic progress that China had made in recent years and the invested Chinese propaganda. The mocking, degrading and xenophobic language used by Mr Trump (especially on China and Chinese) is only going to help Mr Xi keep his flock united for the longish battle.

Personal history is instructive that Mr Xi has been far more stubborn, committed, and prepared for any eventuality as opposed to the decidedly more fickle, vain, and blabbering Mr Trump. Importantly, unlike a distracted and scheming Mr Trump, who has to shape a possible “third term” (currently ruled out under US law), Mr Xi had abolished presidential term limits in 2018. However, Mr Xi’s problems due to an imminent slowdown are serious, and his ability to control shutdowns, unemployment and lack of confidence will force him to accept a Trump outreach, should that be forthcoming. Even then, Mr Xi can claim to have won round two of trade/tariff wars, despite what an increasingly discredited Mr Trump will continue saying.

The writer is a retired lieutenant-general and a former lieutenant-governor of the Andaman and Nicobar Islands and Puducherry