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DAVOS INSIGHT: Trump Admin Gearing Up For a Long-Term Confrontation With China?

DESPARDES — At Davos, the US-China tightrope that world leaders and business executives have been witnessing, yielded a special one: China from the Pentagon standpoint is an existential threat — many, if forced, will choose China though.

As for President Trump, he is searching for short-term political advantage.

Executives think China is too big and advancing too fast to be forced out of the equation.

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They see the “phase one” trade deal — which reduces some tensions between the US and Vhina — as a sign that the world’s biggest market remains a can’t-miss opportunity.

According to a report:

  1. The Trump administration is gearing up for a long-term confrontation with China, a rival viewed increasingly as an existential threat.
  2. Experts, executives and most world leaders agree that China is too big and advancing too fast to be forced out of the equation.
  3. There was a palpable sense of relief among the Davos crowd that “phase one” trade deal reduced tensions between the U.S. and China.
  4. The executives see it as a sign that the world’s biggest market remains a can’t-miss opportunity.
  5. On 5G technology, where the U.S. has squeezed allies hard to convince them to shun China’s Huawei, the U.K. and Germany, among others, are hedging their bets, and China is using leverage of its own.
  6. Electric vehicle manufacturing is just one example of an industry where it’s not possible to be competitive globally without employing Chinese technology, says Adam Tooze, a historian at Columbia University.
  7. The dependency goes both ways. Most consumer electronics, including nearly all computers and smartphones, are made in China, while China still relies on U.S. semiconductors and software. 
  8. “It’s more of a Washington sentiment than it is a business sentiment,” Kelly Grier, U.S. chair and managing partner of Ernst & Young, says of hawkish claims that doing business in China crosses security and ethical boundaries.
  9. The recent trade war escalation provided a “wake-up call” to U.S. business about just how dependent they had become on China, Grier says. They’re adjusting, but not prepared to walk away from that market.
  10. Trump is only searching for short-term political advantage — he gushed about his friendship with Xi Jinping while in Davos — the Pentagon is not.
  11. Many, if forced, will choose China. Consider African countries dependent on Beijing for investment and infrastructure.
  12. “If you’re in the Asia-Pacific — every single country’s main source of imports is China,” notes Carlos Pascual of IHS Markit and a former senior U.S. diplomat. “Are those countries going to break economic relations with China? Unlikely.”
  13. The bottom line: “We’re navigating a zone we’ve never been in before. It was all so much simpler during the Cold War,” Columbia University historian Tooze.