Don’t understand the US-China trade war? This metaphor could help

Trump Trade War 2018

Mr Donald TRUMP, President of the United States of America. Copyright: European Union Event: EU Leaders’ meeting with the President of the USA

This article is brought to you thanks to the strategic cooperation of The European Sting with the World Economic Forum.

Author: Ross Chainey, Digital Media Specialist, World Economic Forum

US President Donald Trump has slapped 10% tariffs on about $200 billion worth of Chinese imports, intensifying a trade war that has sent shockwaves through the global economy.

“Unfair policies and practices”, such as the theft of US companies’ intellectual property are to blame for the escalation, Trump said in a statement, and despite recent talks aimed at breaking the deadlock between the two sides, neither seems in a rush to back down.

It’s a hugely complicated issue, with dizzying amounts of money at stake (in 2017, trade between the two countries totaled $636 billion). In one session at the Annual Meeting of the New Champions in Tianjin, Covington & Burling’s managing partner Timothy P. Stratford resorted to a sporting metaphor to break it down.

“The analogy I use is football,” he said. “One team shows up on one side of the field; they are the World Cup champions. And on the other side of the field you have the Super Bowl champions.

“They’re both there to play football but they have very different ideas … each team plays a very good game but the rules they play are designed to showcase different skill sets.

“The World Cup football team is very agile, they move very quickly, they adjust rapidly. The American football team is more deliberate – every play is planned, every player on the field has a coordinated role, they wear protective gear.

“Basically the US and Chinese economies are like these two teams, playing on the same field.”

So which one is which?

It’s an American game, of course. But in this analogy, it’s the Chinese economy that is playing the US style of football.

“The US side, by putting down tariffs, is trying to pressurize the Chinese government to change and play its style of football,” Stratford said. “The US government wants China to move more in a market-oriented development model, and the Chinese government believes that what they are doing now is in their own best interests.

“In fact they are concerned that perhaps US motivation is to keep China down, wanting to suppress their growth and to contain China.”

Is there an end in sight?

“You have a very big gap between the Chinese side and the US side,” Stratford added. “I expect there will be a deadlock for quite some time.

“The US view is that China has embarked on a path where they have state-led economic development in many key sectors of the economy and this is against the fundamental, underlying assumptions of the WTO [World Trade Organization] and that therefore this is causing harm …

“The fallback from some people in the United States is that the Chinese economic system is putting harm on the US economy and US companies, the next best thing to agreeing to solve the problem is to have a gradual decoupling, and all you have to do is threaten tariffs and threaten investment restrictions and already companies have to factor this into their plans.”

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