"Summary: A Real Driver of US-China Trade Conflict"

MKT 408 (Section 1)

Prepared For

Reaz Hafiz

Senior Lecturer
Department of Business Administration

EAST WEST UNIVERSITY

Prepared By

Sabbir Hasan Emon

2018-1-10-277

Bachelor of Business Administration

EAST WEST UNIVERSITY

9 August 2021
 Contents
Introduction ................................................................................................................................... 1
1. Hegemony Stability Theory, Post World War 2 & US hegemony .................................... 1
2. China’s Rise and Power Transition Theory ........................................................................ 1
3. China’s Challenges to US hegemony ................................................................................... 2
3.1 Belt and Road Initiative (BRI) ......................................................................................... 2
3.2 Asian Infrastructure Investment Bank (AIIB) .................................................................. 3
3.3 Made in China 2025 ......................................................................................................... 3
US Efforts to Prolong US hegemony ........................................................................................... 3
Conclusion ..................................................................................................................................... 4
Reference .........................................................................................................................................

Table of Figures
Figure 1: BRI ................................................................................................................................. 2
 Introduction

While already having tariffs on the items like aluminum, washing machines, steel and solar
panels, on July 7 back in 2018, the US had imposed 28% tariff on $34bn of Chinese items
and as a response the Chinese Govt. imposed 25% tariff on US imports of agricultural
products and autos. Later by the end of the year of 2018, US imposed more tariffs and also
China too responded. We know that it suppose not to be like that, as international trades
should be beneficial for all the parties of the world because that’s what the pledge was
since the WW2 when the trade barriers were removed for reducing costs of living and
accessing cheaper public goods. Then why would US-China would hurt each other
economically? Because, this trade war between these two nations is political not
economical. As China gradually taking control of East-Asian regions, the US is in fear of
losing their hegemony which they had got right after the WW2.

1. Hegemony Stability Theory, Post World War 2 & US

hegemony

HST theory tells us that, a country that possess superior economic and military resources
over other and controls other countries while those other countries accepts and follows the
lead even for those weaker and smaller states the costs they incur to get those public goods
is a lot higher. It also explains the Pax Americana means American Peace which was
modeled after the end of the World War 2 in 1945 when US immediately became the
dominant nation in terms of economic and defense divisions. They started to spread its
values and interests around the world with their public goods like currency while acting
like a protector and geopolitical stabilizer, setting the liberal order.

2. China’s Rise and Power Transition Theory

Since the economic reforms of 1978, the US hegemony has been challenged by the gradual
rise of China for last seven decades as China’s GDP growth rate over the last four decades
was around 10% moreover the size of its economy is on second in the world right after the
US. For the developing countries (ex: Bangladesh) China became the first choice for
inward and outward FDI. Meanwhile back in 2013 China already overtook USA in terms
of being the largest trading nation.

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China constantly strengthening its military, technological and economic power which
setting it to be the next hegemony while declining US. So, the hegemonic war is very much
predictable and inevitable. This war is PTT which occurs when the dominant state’s power
declines and the rising challenger which is dissatisfied with the order continuously reduces
the gap between them and initiates the war. History tells us that, this type of war occurs
when the existing hegemony fears the rising power and tries hold it by waging the war
rather than taking defensive measures by reducing its involvement and commitments
abroad while accepting the rising challenger and this is what also the US is doing.

3. China’s Challenges to US hegemony

3.1 Belt and Road Initiative (BRI)

Motivated by “the Silk Road Spirit”, the BRI also known as the “Silk Road Economic Belt
and 21st-Century Maritime Silk Road” is the signature project of the Chinese President Xi
Jinping which was announced back in 2013 in order to connect the Asia, Africa and Europe
so that regional infrastructural construction, economic cooperation and world peace can be
promoted. With the pledged support of 70 nations, the BRI accounts for:

80%

70%

60%

50%

40%

30%

20%

10%

0%
World's GNP World's Population Global Energy Reserve

BRI accounts for

Figure 1: BRI

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 3.2 Asian Infrastructure Investment Bank (AIIB)
After the global financial crisis in 2008, Beijing had its dissatisfaction with the slow
economic reform which led to the creation of multilateral development bank the AIIB
where the goal was to rise acceptance of the Renminbi (China’s Currency) throughout the
world, for the betterment of Asian social and economic outcome by giving financial
assistance to the developing countries for different infrastructural projects which is giving
real concerns to the US-led multilateral institutions. (As of October 2018):
 87 approved members
 Total investment of $6.4 billion
 Funding projects in BRI partner nations
 Long-term goal of reshaping the Global Economic Order.

3.3 Made in China 2025

To dominate the advanced industries like information technology, robotics, aviation, a
blueprint has been created under Beijing’s plan in transforming it into a high-tech
powerhouse. It has a goal of reducing the foreign tech dependency by:
 Achieving 40% of domestically manufactured basic components & basic materials
by the end of 2020
 70% of self-sufficiency in core components and material industries like aerospace
equipment and telecom equipment by the end of 2025

US Efforts to Prolong US hegemony

It is quite hard for US to accept the decline of its power, control and influence over the
world. So, US trying hard to defend it as much as possible. Already taking measures like:
 Since 2015, in order to foster infrastructure development in the Indo-Pacific region
the US, Japan, India has been discussing the trilateral efforts.
 Discussion that took place between US, Japan, Australia and India in November
2017 by reviving the Quadrilateral Strategic Dialogue to assist the Asian
Development Bank and the World Bank to broaden the lending facilities for
different infrastructural projects.
 Indo-Pacific Infrastructure Trilateral Forum which was initiated back in May 2018
jointly by US-Japan and US-India Business Council that aims to promote market-
based economics, assisting quality and sustainability.
 To resist the Made in China 2025, US imposed tariffs to fight China’s industrial
policy in high-tech manufacturing sectors.

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 Conclusion

The global US hegemony that it created right after the end of the WW2 is under threat of
being diminished by rising power of US. The Trump administration going under this
“America First” protectionism policy to keep its hegemony as much as possible. So, as
long as China keeps moving forward and the fear of hegemonic power transition exist then
the trade war between these two nations will persist even if it’s over.

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 Reference

Kim, M. (2018). A real driver of US-China trade conflict, Emerald Publishing Limited, 3(1), 30-

44. https://doi.org/10.1108/ITPD-02-2019-003