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Trump’s Trade-War Miscalculation

The US seems convinced that it is up against a China with a particularly weak hand, owing to the risk of a hard landing for its economy. But while China imports relatively little from the US, it may have even more weapons than its opponent.

SHANGHAI – Just when a trade agreement between the United States and China appeared to be in sight, negotiators found themselves back at square one. The immediate reason for the disruption was China’s insistence on a substantially rewritten draft agreement, which, according to US President Donald Trump’s administration, reneges on previously agreed terms. But the root cause of China’s changes to the draft – the reason behind its reluctance to meet US demands – lies in a fundamental miscalculation by the Trump administration.

Simply put, the US has been overplaying its hand. The agreement that China rewrote would have obliged the Chinese side to legislate some of the changes sought by the US, and it was negotiated amid an aggressive US campaign against the Chinese telecommunications giant Huawei. That campaign has included adding the company to America’s trade blacklist, thereby cutting off its supply of critical technologies, and pushing allies to isolate the company as well.

While such actions will undoubtedly hurt Huawei, the company can eventually offset its losses by forging ties with other fast-growing Chinese tech companies. For the rest of the world, however, the Trump’s administration’s attacks on Huawei – and on China more generally – will have far-reaching consequences.

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