The World now knows the effect of President Trump trying to eliminate the USA budget deficit with China. His objective was never a normal one in the world of trade between nations, who source what they need from the right suppliers, and sell what they have to those that need their products. Eliminating trade deficits is not a viable strategy on its own.
He has long forgotten his aim, and moved to talk about technology, Huawei and subsidies. Because his original plan threatened the world’s economy with a new undermining of world growth.
We all know enough about China’s history and 70 years of the PRC to know that China would never change its development model to suit the changing target of the President. China has been moving its trade towards the developing world so that it is only 33pc exposed to the West, down from 70pc just 15 years ago.
China is the major buyer of USA agricultural goods and supplier of consumer goods. The tariffs undermines this badly and hurts the USA consumers and farmers. But China is now showing the response which those who know China expected. They will not allow another nation to determine their development.
China could double its purchases from the USA over 3-5 years. China could halve its sales to the USA over 3-5 years. One of those options is good for the USA but tariffs deters China from depending on the USA for its imports.
Both nations are altering their plans to accommodate these initiatives from President Trump, who is trying to find a calmer path, having started yet another firestorm. But China will only move slowly and not respond to threats or tariffs.
The world’s economy is on a knife edge and China has been 30 pc of world growth. Growth is vital to the West. China’s growth is vital to the West.
Let’s hope the upcoming elections in the USA will encourage President Trump not to risk the world economy, and that of the USA and China any more.
We need growth to escape the risk of recession but the Chinese people will understand if they have to pull in for a while. I am not sure the Americans will have the same response.
I was a part of our companies Icebreaking team which did the first sales from the USA to China in 1972. It was a great moment in changing history. It opened the world and the world needed that. Since then trade and investment has flourished between the two nations, and I created the biggest joint venture in China with the USA in 1984, which set the tone for all the major deals for the next 20 years. China gave many concessions for that deal which were in both nations interests.
Sadly a new American owner did not treasure the asset when they became the new owners, but they saw the potential of China in this century along with many other major USA companies.
The world cannot split into two as some in the USA think President Trump is threatening. A Western G5 competing with a Developing world G5. Those days of separate development are long gone. Maybe China has to consider new corporate forms to open the world to a shared development but closing doors is not an option. Security is not achieved by corporate bans. Security is achieved by sharing and building interdependence. Threatening China will not achieve results.
This is a time for building a new world based on cooperation and sharing. This is the message from the new developing world.
The USA, where I spent most of my working life, can lead in creating a new world approach based on nations being more open and sharing their developments together. The USA and China are the world’s two biggest economies and together can avoid recession and misery. Together they can share innovation and create a new secure world where conflicts are resolved and economic prosperity focused upon.
I understand President Trump trying a much used American way but I am sure it was just an opening blast and will give way to cooperation. If not he will find that battling with China is exhausting, distracting and eventually floored. China will find that the USA call to consider how its development model impacts others is worth hearing. China needs to start opening its ownership model to more global participation. China does not need to concede sovereignty but it can share its benefits.
A new world is ahead. Not one based on conflict. The world has been there before. Just look at the first half of the 20th century.
So let’s look for new ideas to build a new world based on cooperation and sharing. We need new global statesmen and women with new ideas for the next phase of the world’s development, based upon the three continents with the prospect of industrial revolutions. We need more sharing of the benefits. We do not need the USA to rebuild old walls. We need new ways of cooperating.