Phillip Chritton, former UPS deputy general counsel – international (retired), Sonoco Visiting Fellow and mentor for the international business program, shares his insight on the U.S.-China trade war.  

Sometimes obscured by the U.S. president’s frequent tariff headlines looms the global trade war between the U.S. and China. Even if the world’s two largest economies — and prime military rivals — reach a trade deal, it’s likely to represent a mere pause or repositioning in their global competition rather than a stable, long-term reconciliation. For the world, the stakes couldn’t be higher.

China’s transformation

When I first arrived in China more than 40 years ago, most people lived in the countryside, and there were virtually no private cars or telephones. Anyone visiting China today finds modern cities, bullet trains and factories producing electronics and every manner of industrial and consumer products. Hundreds of millions of Chinese have been lifted out of poverty, and every home and business in the world now buys goods with “Made in China” labels. However one feels about it, this incredible feat must be acknowledged.  

As China’s economy and trade has boomed, however, its image has evolved from that of low-cost manufacturer, trading partner and vast market to competitor and economic and military rival of the U.S., a threat to be contained.   

Why it matters to China

While the world is now waking up to China’s economic might, what’s less thought about is the history driving China’s leaders today. As I tell students, this context is critical. A little over a century ago, China was still ruled by an emperor of the Manchurian Qing Dynasty. Even when the Qing fell, China — already weakened by foreign incursions and internal conflict — experienced further decades of poverty, war and civil war with losses of its people in the millions. Following Communist rule in 1949, China endured a succession of calamitous, self-inflicted agricultural, industrial and political experiments, with infamous names such as “The Great Leap Forward” and “The Cultural Revolution.”  

China’s modern leaders, including Xi Jinping, have vowed never to let this happen again. Beijing’s view that China must today take its rightful place in the world and never be threatened or humiliated, whatever the short-term hardship, should be understood with this historic backdrop in mind.

A trade war breaks out

As China under Xi pursued policies such as “Made in China” to transform the country into a producer of higher value and more sophisticated goods — in some cases resulting in a near unassailable lead in sectors such as batteries and solar panels — the U.S. under Trump 1.0 and Biden responded with tariffs and technology export restrictions. Although trade tensions remained manageable, the U.S. and China, further estranged by China’s support for Russia’s invasion of Ukraine, seemed headed for a showdown.  

That showdown came with the arrival of Trump 2.0 and an “America First” program of massive tariffs, billed as the path to “rebalance” trade and re-industrialize the U.S. The new tariffs on China — ratcheted up to 145 percent at one point — blindsided China’s leaders and threatened havoc for their export economy.  But these tariffs, which China largely answered in kind, also rocked global markets and left U.S. companies bracing for supply chain chaos and risk to their investments in China.  

With its access to U.S. markets increasingly threatened, China had been pursuing alternatives to sustain its export machine. In response to the Trump 1.0 tariffs, Chinese companies moved production to third countries in southeast Asia and elsewhere to circumvent U.S. tariffs on goods made in China, but the Trump 2.0 tariffs have limited these work-arounds. China has also sought out friendlier markets, trying to shift more of its exports to the EU, Latin America and southeast Asia, though it is unclear whether these markets can absorb — or will tolerate — a flood of goods from China.  

Where do we go from here?  

For the moment, the U.S. and China have pulled back from their most aggressive positions and started talking again, but the competition between the two countries will continue and may only just be getting started. Meanwhile, countries in the rest of the world, many caught in their own barrage of the U.S.’s tariffs, are feeling pressure to choose sides.

As the U.S. and China square off, they each face their own challenges. The U.S., given its smaller industrial and worker base, is finding itself ill-prepared to replace China’s vast industrial resources and skilled workforce. The suddenly hot trade war has also exposed significant U.S. vulnerabilities, including China’s near monopoly over rare earths and other strategic minerals vital to key U.S. industries, including the defense sector.

China, for its part, struggles with a weak domestic economy, spiraling public and private debt and an aging population and plummeting birthrate. The trade war has also highlighted vulnerabilities of China, in areas such as AI chips and the aviation sector.  

Most concerning in all of this is the potential for military conflict between the U.S. and China over Taiwan or points beyond. China, which has not fought a major war since 1979 (when it was handily defeated by Vietnam), continues a vast military buildup to project power far beyond its traditional spheres of defense.  

Can’t we all just get along?  

While competition between the U.S. and China is the inevitable result of their size and power, the risk of conflict will certainly escalate if the two continue to pull back from political, economic and academic engagement. Countries that trade with each other have a built-in economic incentive to get along, rather than leaders who might otherwise feel they have little to lose in a conflict.  As such, a “de-coupled” U.S. and China — were that possible — would create a more dangerous world.  

International business programs, including those at the Darla Moore School of Business, have a vital role to play. As a Sonoco Visiting Fellow, I have been deeply impressed how the school is preparing students to navigate — and lead — through complex global business challenges such as the U.S.-China trade battle. This is from not only what students learn in the classroom, but also the focus at the Moore School on understanding, often through first-hand immersion overseas, the historic, political and cultural context at work in international markets. Such preparation has never been more needed, a real asset for South Carolina and the world beyond.