According to Chinese economic expert Stephen Roach, the escalating trade war between the United States and China could ultimately become a protracted “forever war” with no clear end in sight.
The former chairman of Morgan Stanley Asia challenged US trade policy towards China in public remarks in Beijing on Friday. A trade war between the two countries would be a “mistake” and would ultimately be detrimental to both sides, Roach said in his comments. Bloomberg.
“I am concerned that Biden is moving even deeper into a new ‘forever war’ against China’s trade practices,” Roach said.
The comments come after he had previously criticised China’s leadership, drawing the ire of Beijing. Financial Times The paper criticised the Chinese government’s harsh response to the Hong Kong protests in 2019 and 2020, saying “the Beijing-centric imposition of a new national security law has destroyed all remaining vestiges of local political autonomy in the former British colony.”
The comments were unpopular with Chinese authorities — Roach said he was asked not to speak about the topic when he spoke at the China Development Forum earlier this year — but he has also expressed concern about China’s shaky economy. The country’s real estate industry has collapsed and its largest property developer, Evergrande, has filed for bankruptcy. Meanwhile, Chinese consumers are cutting back on spending, further slowing the economy.
“China faces serious challenges,” Roach told CNBC in March. “They may have run out of imaginative solutions to difficult problems.”
Meanwhile, the trade war with the United States, the world’s largest economic power, is intensifying.
Over the past year, the Biden administration has implemented a series of new trade policies aimed at restricting China’s access to certain technologies, especially semiconductors. In October 2023, the U.S. restricted Chinese companies’ access to chips used in AI development. The U.S. eventually mobilized allies such as Japan and the Netherlands to also implement a partial ban on sales of AI chips to China.
China responded with its own chip ban this year, putting up new barriers targeting U.S. companies like Intel and AMD, whose products have been phased out of government systems. The Biden administration also implemented tougher export bans to close loopholes that still allowed China to get hold of certain Nvidia chips.
The tit-for-tat between the U.S. and China has also spread to companies in other industries. The possible forced sale of TikTok to a U.S. company has also irked Chinese authorities, not to mention the social media company’s parent company, ByteDance. More recently, the Biden administration has imposed heavy tariffs on Chinese electric vehicles and a range of clean energy products, including solar cells and advanced batteries.
But Roach warned that any gains the U.S. makes from blocking Chinese semiconductor technology could be offset by China holding back green energy development.
“Taking a protectionist stance against a country like China that has a comparative advantage in producing non-carbon alternative energy products that a climate-challenged world desperately needs could be a mistake of historic proportions,” he said.
China is a global leader in many of the technologies that enable or drive the energy transition: it produces 80% of the world’s solar panels and is also the largest producer of wind energy.
Other critics echoed Roach’s sentiment that restricting the import of green technology would be self-defeating, arguing that restricting the free flow of green technology would ultimately hurt America’s efforts to combat climate change.
It will likely take years for the full impact of the US-China trade war to be fully understood, and in the meantime, however severe its effects may be, tensions are unlikely to ease anytime soon. FT “The path to resolution of tensions between the U.S. and China does not appear to be easy,” Roach wrote in a February paper.
