The markets might be rattled, but if the U.S. doesn’t hold firm in its showdown with China over tariffs, things will only get worse.
We’ve got to suck it up. Indeed, we must be bold here. Chinese President Xi Jinping’s tariffs escalation reflects his bet that he can spike U.S. domestic fears over the economy, and a corresponding popular pressure on Trump to back down. To the fortune of our national interest and global order, Trump is unlikely to budge.
Still, those are the unmistakable stakes here: national interest and the American-led global order. What Xi wants is not a mutually acceptable deal, but a return to China’s business as usual: to keep displacing global order away from the rule of law and relatively free commerce and imprisoning it to Chinese feudal mercantilism. That grand ambition explains China’s rampant intellectual property theft and its militarization of the South China Sea. Xi is playing for the World Series in perpetuity.
Of course, if we care about mutual prosperity and the democratic rule of law, Xi’s victory is manifestly not in America’s interest. We must not blink in the face of his pressure. And if we stand firm, Xi will have to back down because China’s economy is already weakened by foreign investor doubts, caught between rural poverty and urban wealth, and vulnerable to low-cost labor competition from the region. That’s why Xi wants to subjugate nations such as Vietnam with his South China Sea policy.
If America blinks now, Xi will sense the weakness, and a storm will follow of escalating intellectual property theft, cyber attacks, high-risk espionage, and military aggression in the western Pacific.