Just a few weeks ago, political momentum favored a resolution in the trade war between the U.S. and China. For starters, both administrations signaled that an end to tensions bode well for their respective policies. Beyond that, let’s consider the obvious: a deal is necessary for global economic growth. Yet in this zero-sum game of modern capitalism, this olive branch has gone down the crapper.
It’s a surprising turn of events because it also represents a rare bipartisan decision. While President Trump remains the shot-caller, he’s not impervious to Democratic sentiments. With economic metrics turning north, all aisles of the political spectrum urged the White House not to concede cheap points. Sensing his political future in doubt, Trump did what he does best: play hardball.
Of course, this zero-sum game isn’t going to please those participating in the economy’s ground floor. Farmers and those in the agricultural industry will be hit hard again. So too will retailers who depend on cheap labor and even cheaper products to ramp up their profitability margins. Countless other companies both big and large eventually will suffer some level of consequences.
Yet this time, we might not see a resolution for a long time. Chinese President Xi cannot afford to lose face in front of his countrymen. And Trump just can’t stand to lose on any level. With their personal ambitions at stake, I can’t imagine this zero-sum game ending cleanly.
A New Paradigm for the American Psyche
Another reason why this geopolitical impasse feels different is the shifting tide in the American psyche. For decades following World War II, Americans enjoyed the benefits of hegemonic domination. In other words, whatever they want, they got.
That has changed, though, with the erosion of national industry, along with the rise of global competitors. Today, we can no longer call ourselves economically independent, although we hear such irrational rallying cries every four years. The reality is that we’re more dependent on other countries than ever before.
Ironically, a big reason why is our insistence on playing the zero-sum game. Historically, our trade relationships benefited the American consumer above all else, including humanitarian concerns in the Third World. While this silently ruthless practice led to lower prices, it also fueled complacency. Americans now demand these discount rates.
But in order to provide them, somebody somewhere must work for inhumanely low wages; that’s really what the zero-sum game is all about. But the trade war now threatens this dynamic. While we’ll hurt the Chinese, they’ll also hurt us directly.
Because a trade war means less access to cheap labor. That in turn means higher prices, something that many Americans simply can’t fathom.