US and China: Not heading for a trade war, says Ian Bremmer | Eurasia Group posted on the topic | LinkedIn

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Are the United States and China heading for a trade war? Not quite. Ian Bremmer explains the latest back-and-forth between Washington and Beijing and why neither side wants to push the escalation too far: GZERO Media #AskIan

Transcript

- Hi, everybody. Ian Bremmer here. And a lot of back and forth on US-China relations. Unlike almost every other US bilateral trade relationship where we have interlocutors that really want to avoid a fight with the United States and are trying to make themselves more resilient, trying to ensure that over time they will have more diversification so that the US can't hit them as hard, but the deals that are getting cut are generally aligned with what the Americans want and not what the other countries would have chosen for themselves, that is not where we are with China. We've now had two separate rounds where the Americans have escalated, the Chinese have hit back, and the Americans have backed off. Why? Because China, of course, is a far stronger country. Not as strong as the United States economically, but nonetheless, the only one that's close. Also has a lot of leverage over the Americans, just like the US has over China. The Chinese need access to the American banking system, need American semiconductors. The Americans need access to Chinese pharmaceuticals and chemicals that are precursors to those, also need critical minerals, and rare earths, and the reprocessing. And furthermore, the Chinese are at least as credible as the Americans, and they think they're more credible in being willing to take political pain. After all, Trump, you know, has 40% approval ratings, give or take, and has to, you know, face elections every four years. Xi Jinping doesn't, and I assume his approval ratings are pretty high, not that we'd ever know. And so the intention of the Chinese to hit back hard when they think that the Americans are hitting them and to be in the poll position is at least as confident as what we see from Trump with the Chinese. And that's of course exactly what we've seen over the last several days is in response to the Chinese escalating on critical minerals licensing, which came in turn in response to the Americans putting more companies on a watch list that would have export controls on them. Trump suddenly says 100% tariffs by November 1st. The markets go down, and before the markets reopen this week, Trump immediately sends out another post saying, "Ah, it'll be fine. We will find a way to come to yes with Xi Jinping. Don't worry about it." And I think that that latter does reflect the reality. I think there are real guardrails between these two countries because they don't want to get in a trade war. They don't want to find out who has more cards, who's going to hurt the other, especially because Trump doesn't want to see significant inflation, doesn't want his economic numbers to go down, and is frankly concerned about that. Same way he walked back his initial talk about firing the fed chief, Powell, because the markets threw up all over it. This is a real constraint for Trump, and it's a constraint that Chinese have some influence over. One final point I'd make, I mean, Xi Jinping and Trump are going to meet in short order, likely on the sidelines of the APEC Summit coming up in a few weeks. But what Trump wants from Xi Jinping personally is TikTok. He wants the algorithms, he wants political control of that company in the United States from people that are aligned with him, like the Murdochs, like Larry Ellison, and others. Very important for him in controlling the information space in the US. Something he knows a lot about, something he's actually quite talented at. Xi Jinping doesn't attach a lot of importance to TikTok. Their AI focus is really on industrial and defense use and not on the consumer side, but they do want something back in return. And what's most important to Xi is Taiwan. Not ownership over it in the near term, not taking it over, that's a longer term play, but in the near term, more pressure on President Lai who's more oriented towards independence, but not particularly popular in Taiwan. And Trump's personal orientation towards Taiwan is far away, "Allies should be doing more. I don't want to fight on that." And that's pretty aligned with where Xi is. So I do think that actually the highline conversation between these two men likely to be relatively smooth and positive when they meet one-on-one. How that works with the bureaucracy with lots of Americans around Trump focused on containment, lots of Chinese focused on a tough relationship between the two, that's going to be a challenge. But ultimately, I don't think this is heading towards a blow up. That's it for me, and I'll talk to you all real soon.

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