IN THE 1990s America and Europe had a trade dispute over bananas. No one worried that tanks might soon roll as a result. But trade is about more than economics. The European Union, the world’s most ambitious free-trade area, was founded on the idea that trade integration would make war between members “not merely unthinkable, but materially impossible”. As the risk of a serious Sino-American trade war grows, attention is mostly focused on the prospect of dearer iPhones and unhappy soyabean farmers. But the stakes are much higher.
China’s economic miracle could not help but provoke geopolitical stress, given its size and illiberality. Relations between America and China are built on mutual suspicion. Geopolitical rivalry has been moderated, however, by economic interdependence: a mutual entanglement some economics wags have dubbed “Chimerica”.
As China opened up, American consumers hoovered up cheap Chinese goods. American firms built China into their supply chains, enjoying low labour costs and gaining a presence in a...Continue reading