The hidden danger in Trump’s trade war

When it comes to the escalating trade war with China, the most obvious historical analogy for the US launching an all-out economic assault on a rising military power in East Asia is not an encouraging one.

Starting in 1940, the US, alarmed by Imperial Japan’s invasion of China and burgeoning alliance with Nazi Germany, began passing a series of increasingly severe restrictions on exports of the raw materials needed by the Japanese military. These eventually culminated in a complete freeze on Japanese funds and assets held in the US and an embargo on oil exports. The hope was that this would force Japan, overwhelmingly dependent on energy imports, to curb its military ambitions.

Instead, believing war with the United States to be inevitable, the Japanese launched a preemptive strike on the American fleet at Pearl Harbor.

We’re not quite there yet, but it’s worth keeping in mind that the trade war between the world’s two most powerful countries is taking place within the context of growing military tension. Just as President Donald Trump was first announcing his tariffs at the beginning of April, the Chinese military was wrapping up its latest live-fire drills around Taiwan. Though demonstrations like these have become relatively common as tensions have grown in the Taiwan Strait, the latest drills were significantly larger and, some analysts believe, revealed significant details about the tactics China is likely to use to take the island.

Those drills came along with recent reports of “invasion barges” China may use to bring troops ashore on Taiwan, accusations that Chinese ships are intentionally severing undersea internet cables, and a host of flare-ups in long-running territorial conflicts involving China’s neighbors Japan and the Philippines.

The juxtaposition of these shows of military dominance with Trump’s “Liberation Day” — led by a 54 percent tariff on Chinese goods, which has since risen to 145 percent as China has retaliated with tariffs of its own — is a reminder that the trade war can’t be separated from wider geopolitical tensions.

Though they’re sometimes discussed as somewhat separate issues in the US, the Chinese government has made clear it sees little distinction. “If war is what the U.S. wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end,” China’s foreign ministry posted on X after the White House announced the first round of tariffs in March.

While recent comments from the White House and reports from Beijing suggest the two sides may be looking to cut back on at least some of the tariffs, it’s hard to imagine that the world’s most important economic relationship will return entirely to normal or that the tension won’t spill over into noneconomic areas.

“Trump clearly thinks that he can separate economics and security issues, and I think the Chinese will want to demonstrate that that’s not the case.” said Zack Cooper, a senior fellow studying US-China competition at the American Enterprise Institute.

Cooper says experts were already concerned about China testing the new administration’s response to a regional provocation, and that the atmosphere of mistrust and uncertainty created by the tariff war adds to the risks of a crisis spiraling out of control.

In short, we’re forced to confront the question of whether the trade war could make a real war more likely.

Many of the officials Trump has appointed to senior positions — including his secretary of state and national security adviser — are considered China hawks, but a notable feature of the president’s second term has been the relative lack of focus on competition with China outside of trade policy. “China hawks are losing influence in Trumpworld,” ran the headline of a recent Economist article, which notes that even some of the most hardline voices in the administration have recently moderated their tone, saying Taiwan is not an “existential” issue for the US, for instance.

Trump himself has been equivocal about whether the US should defend Taiwan, has threatened to withdraw troops from US allies like South Korea and Japan as leverage in trade talks, and the US military has actually moved some valuable military resources out of East Asia. The contrast between Trump’s rhetoric and that of Joe Biden — who made competition with an axis of autocracies led by China a central motif of his presidency — is striking. The only mention of China in Trump’s inaugural address was in the context of Panama.

This doesn’t mean Trump has de-escalated. China remains the “pacing challenge” for the Pentagon under Secretary of Defense Pete Hegseth, and Hegseth himself recently visited Japan and the Philippines to discuss bolstering alliances to counter an increasingly assertive People’s Republic. The latest House Republican defense spending proposal contains $11.1 billion for Pacific deterrence. But there’s no indication that Trump is looking for a military conflict with China — or that China is interested in one with the US.

Trump’s advisers say he’s interested in sitting down for “man-to-man” talks with Chinese leaders Xi Jinping for talks that could encompass trade as well as other issues, such as nuclear security. But the Chinese, confident in their ability to weather the tariffs, have shown no interest in leader-to-leader talks, instead launching a diplomatic offensive to attempt to dissuade other governments from cutting their own deals with Washington.

The Chinese government has a longstanding and deeply held belief that US military and economic policy are aimed at preventing China from achieving its rightful status as a regional and global military power. And Trump’s tariffs are no exception.

“The Chinese view the trade war as a means to suppress their economic development and to isolate them from global trade,” said Amanda Hsiao, China director at the Eurasia Group.

Most experts don’t believe China would use military force as a direct response to trade policy. China is not going to invade Taiwan to get Trump to abandon his tariffs, in other words. But the tariffs raise the likelihood of miscalculation.

“What I worry about is that Chinese respond to some action we’ve taken on Taiwan that gets misinterpreted as a response to an action to the trade war,” said Evan Medeiros, former senior director for Asia on the White House National Security Council, during a panel discussion last week. “In a situation like we have today, where communication channels are almost zero, the prospects for a serious strategic miscommunication leading to a military action is very, very serious.”

Senior US and Chinese military officials held their semiannual talk in Shanghai meant to address just those sorts of miscalculations on April 3, the day after the tariffs were announced. Hsiao said that whether more talks like these are held going forward will be a good indication of whether the tariffs have had a serious impact on the security relationship. The regular meetings had been suspended by China — along with a range of other forms of cooperation, including talks on climate change and fentanyl — as a reaction to then-House Speaker Nancy Pelosi’s controversial visit to Taiwan in 2022.

One reason that it will be difficult to entirely compartmentalize the tariff war and military competition is that — despite its best efforts — US military supply chains are still dependent on technology and raw materials from China. In recent days, senior US officials have reportedly been scrambling to address the fallout from China’s new restrictions on the export of so-called rare earth metals — vital for a number of industries, including the defense contractors that manufacture drones and other cutting-edge systems for the US military.

The fact that the US may be at least partly reliant on China to build the drones it wants in order to potentially fight China highlights the most bizarre difference between the US-China relationship and previous instances of superpower competition: Never before have two military rivals been this economically dependent on each other. Perhaps no one sums up this contradiction more than Trump’s billionaire ally Elon Musk, who has made himself an invaluable component of the US military-industrial complex even as his business empire is deeply reliant on China.

America’s economic reliance on a country that poses a potential major military threat is one reason both Republican and Democratic politicians have called for “decoupling” the two economies, or at least “friendshoring” — encouraging US companies to deepen their ties with US allies rather than adversaries.

This now appears, to a large extent, to be happening. In one dramatic development this past week, Apple announced that it will shift assembly of US iPhones — an emblem of US-Chinese economic integration if there ever was one — to India.

But are there downsides to decoupling? Economic interdependence has also created more points of dialogue between the US and China — at the government, business, and civil society levels — and quite literally raised the costs of increasing tension.

“If the tariff war continues in its current format, most likely we’re looking at the decoupling of the two economies, and that will give the two countries potentially less incentive to try to work out issues together,” said Yun Sun, director of the China program at the Stimson Center. That will lead to a situation, she said, where “the only thing to prevent the US and China from going to war is war itself.”

The horror of war itself, she noted, is still a pretty serious incentive to avoid war. After all, the US and Soviet Union avoided war for 40 years not because they were concerned about the global economy but because it could have been literally apocalyptic, as they could be with a US-China war today. But given the stakes of a potential miscalculation, the dangers of losing some of the few remaining points of contact between the two sides should not be dismissed.

The idea that trade can prevent war, or at least make it less likely, is not a new one. “It is commerce which is rapidly rendering war obsolete, by strengthening and multiplying the personal interests which are in natural opposition to it,” philosopher John Stuart Mill wrote in 1848.

Obviously, this prediction was a bit premature, and the “capitalist peace” theory has always had a few exceptions. Contra Thomas Friedman’s famous “Golden Arches” theory, a number of countries with McDonald’s have, in fact, gone to war with one another, most recently in Ukraine.

But it’s also hard to believe it’s a coincidence that international wars — as opposed to internal civil conflicts — became exceedingly rare in the last few decades of the 20th century, just as economic globalization in tandem with the exponential growth of international trade.

Trump’s assault on the international trading system comes at a time when the number of conflicts, including international ones, are starting to creep up again, and tensions between the world’s superpowers are already at a worryingly high level.

“We are in terra incognita a bit,” said Medeiros. “The US hasn’t had this kind of trade war with any country since the 1930s, so we’re all sort of walking around in a very dark room trying to understand how the actors are going to behave.”