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Domestically, neither China nor the US leadership can afford to be seen to have lost. In part, this is why win-win outcomes are so fantastically useful in trade negotiations, because they respect the difference between each states presentation of the outcome to its voters. "we won" is a better message than "we lost" for everyone.
You would think the author of "the art of the deal" would understand when the best option is to give your opponent the appearance of a victory to sell to their community. You would think they would recognize when you also needed the same outcome.
(since we know he didn't write the book, this is a rhetorical device)
China has nothing to lose, they remain committed to exporting to the global market. The US quality of life was built on deflation from importing inexpensive goods at scale. China’s pain will be temporary as they reconfigure their export system, US pain will be permanent. There are not enough US workers or time to build what is being parroted to replace imports with domestic production. Xi is sophisticated, Trump is not.
https://news.ycombinator.com/item?id=43617956 (citations)
I certainly don't disgagree that Xi won't back down soon, nor will Trump. Nor that global trade will continue: When China and Australia entered a dispute, Australia found substitutable markets for most of its sectors exporting in bulk to China, and in the end they came to rational terms quietly. We all feel much better about the diversified markets now. And in like sense while the whole US beef thing is very annoying it's actually under 10% of our total beef exports.
But I think you underplay how much damage the US could do to the Chinese economy, if (for instance) they repudiated the debt. Or, if they heavy trading partners to drop favourable trade terms to gain back US markets. I think people would be insane to give in but from time to time this kind of thing happens for a short term win. We recently pumped a shitload-and-a-half of money back into the pacrim island economies, to displace China as a trade and security partner having taken our eye off the "backyard" as it is disparagingly called.
China has ~1.4B people and will. They lead in 37 of 44 of advanced technologies. They are already a manufacturer to the world not only for low value goods, but also high tech goods. They are the largest buyer of industrial robotics, they have ~540GW of annual solar PV manufacturing capacity (through the entire vertical), and they account for almost 60% of global EV production. They are erecting twice as much wind and solar capacity as every other country combined. The US has ~340M people and offshored anything that isn't financial services, tech, etc. The US has lost the will to build, and only started to recover it under enormous effort (Inflation Reduction Act). There will be blood. I'm not underplaying the damage the US could do to China via trade restrictions, but rather saying whatever the US does, China will not only survive it, they will lean even harder into whatever they believe will lead to their definition of success.
As Xi would say, "Eat bitterness" (a Chinese idiom signifying enduring hardship and suffering without complaint, often seen as a virtue of perseverance and resilience). Can Americans endure hardship incurred by a brutal global trade war? If so, for how long? Such a natural experiment is about to occur, which is interesting, exciting, and terrifying simultaneously.
Xi Jinping calls on young Chinese to embrace hardship - https://www.thinkchina.sg/society/xi-jinping-calls-young-chi... - June 16th, 2023
'We don't care!' Victor Gao dismisses US market threats after Vance's 'peasants' remark [video] - https://www.youtube.com/watch?v=eb6Ms_SqWtY
"We don't care. China has been here for 5,000 years. Most of the time there was no United States, and we survived. And we expect to survive for another 5,000 years."
Could you provide more information on what you mean by "repudiated the debt"? Does this mean reneging on US Treasury bonds? Because that's nuclear. That causes fixed income markets to implode and brings upon GFC 2.0.
It's implicit in the Mar a Lago model: They will tell debt holders to re-negotiate to longer term debt instruments on low interest or risk losing their money de-facto by being put on some (soverign risk incurring, true) other path which pays out worse for them as the debt holder.
The risk of losing their profit is what I meant by repudiating the debt.
Chinese investor interests hold ~ $800b of debt. Thats not the state, but it is doubtful the state would bail them out: They pick and chose how to fix problems like this and I think the message "You invested in America not us, you wear the risk" would be beneficial to them.
Xi is not that sophisticated. Trump is abysmal.
I was amazed by China's behaviour in their trade war with Australia. They banned our coal. We were treated to the sight of Australia's coal transport ships as far as the eye could see sitting outside of China's ports. It caused havoc on the Australian side at the time, paying for all that shipping time, figuring out what to do with all the unwanted coal.
But China used that coal in their coal fired power stations. It was their winter. They were literally freezing in the dark. It went on for months.
FWIW, the usual take is Australia won that war. Australia didn't do anything in retaliation. We keep buying from China when they were cheapest, and busied ourselves by seeking out new markets for our products elsewhere. We would have been better off if it hadn't happened, but there was an upside - we developed new markets.
The trigger for all this was our then Prime Minister sided with Trump, in blaming China engineering COVID. True or not, poking the Pooh Bear like that was pure insanity. We got rid of that prime minister as soon at the next election.
Xi does take stands on principle, and he is willing to bear a lot of pain while doing so. If you doubt that, look at how he handled COVID. I don't think there can be much doubt that in a fight about principles between Trump and Xi, who is the most principled man. It isn't even close.
they never blamed China for engineering covid...they wanted an international-led investigation into it and i think the australian position was spot on on the right point
The broad Australian Government ( the "they" of the above comment? ) didn't .. but the then Australian Prime Minister personally very much did so.
Initially in the public sphere he was forcefully calling for an independant body with "powers equivalent to those of a weapons inspector to avoid another catastrophic pandemic" while rumoured (ie leaked gossip) to be channelling the worst US Trump first term sinophobia in phone calls to world leaders drumming up support.
I separated Australia from the then PM Scott Morrison delibrately, in a number of ways he acted as a law unto himself not as a representative of the nation as a whole.
I accept that his off the record attacks on China are hearsay, but to those that followed the people and attitudes they make sense and account for the reactions of China that shortly followed when the off public record discussions made the diplomatic rounds and got back to Xi.
Even the Chinese got on board with an international investigation:
Last night the World Health Assembly (WHA) passed a European Union motion calling for a "comprehensive, independent and impartial" investigation into how the pandemic started and the international health response.
A record 137 countries — including both Australia and China — ended up co-sponsoring the motion, giving it overwhelming international endorsement.
that wasn't the cause of Australia - China falling out.
That was the public insinuation that COVID was an engineered weapon and the behind the scenes name calling and accusations from the Australian PM.