George Magnus—

When Mark Antony utters the words ‘let slip the dogs of war’ after the assassination of Julius Caesar, he is thought to be referring to devices in civilised societies that allow or inhibit war. For a long time, China and the US have had spats over specific trade issues, or sometimes currency matters, which never really threatened the fabric of their relationship. In 2018, this all started to change, not least because beyond the headlines about trade lay the sensitive issue of new technologies and their ubiquitous applications as much in defence as in commerce. The phrase ‘dogs of war’ then seems an appropriate way to think about trade, and the nature of trade relations between China and the US in particular, and the West in general. 

Although the world’s two biggest economies enjoy a relationship marked by a high state of interdependence in economics, commerce and finance, the new tension between them when it comes to trade and investment is remarkable. The tension is best captured by the geo-economic thinking of the political scientist Edward Luttwak, for whom trade is the ‘logic of conflict in the grammar of commerce’. 

The meaning is self-evident, and while his 1990 writing was about the aggressive export-led growth of Japan and the Asian Tigers, and the impact of the creation of the European Economic Community, the essence of the commercial conflict he was describing is equally applicable today. Fundamentally, it is about the conversion of economic clout by China into regional and global political influence, where the US, the incumbent and dominant power until now, has held sway.

At the end of 2017, a new national security strategy review did not mince words about the adversarial role in which the US now sees China. Citing China as existential economic competition to the US, it vowed stricter enforcement of trade violations, which is diplomatic code for tariffs. China wasn’t the only country in the crosshairs of the White House, but it is the major one, and one with which the US runs a large deficit. President Trump’s view about trade is that it is a zero-sum game in which there can only be one winner. China’s view about trade is ostensibly much more aligned with that of other advanced economy and international organisations, but Xi’s China is certainly not blameless in allowing trade tensions between the two countries to reach boiling point. 

The rest of us look on with curiosity and concern at both the Trump administration and China. The US says it supports the multilateral trade system in principle, and yet it is simultaneously pulling back from its long-standing Asian and global commitments. China tells the world that it wants to champion globalisation, maintain a free and open trading system, and open up to foreign firms and capital, and yet pursues policies that are the exact antithesis. It is precisely as Edward Luttwak described.

From Red Flags by George Magnus. Published by Yale University Press in 2018. Reproduced with permission.

George Magnus is an associate at the China Centre at Oxford University, a research associate at the School of Oriental and African Studies, and former chief economist of UBS. He has written extensively about China in the Financial Times, Prospect, and other economic and financial publications.

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