Conflict and Competition in US-China Relations

An analysis of 2018 trends, tactics and forecasts in U.S.-China trade frictions

These are the main assessments from a full analysis report produced by the APCO Risk Forecasting Team. For the full report in PDF format, please go here.

Key Assessments

Nine months of routine monitoring and analysis of U.S.-China trade frictions reveal the following conclusions:

  • Aggressive U.S. trade policy towards China originated from purely economic concerns, but is increasingly becoming a political struggle. For China, the trade conflict has been a political confrontation from day one.
  • The trade dispute has seen many longstanding U.S. concerns crystalize into the sharpest effort yet by Washington to address grievances regarding what it sees as Beijing’s protectionist economic practices.
  • The relative unpredictability of the Trump administration has allowed it to deploy adventurous measures against China. These have placed Beijing on the back foot and seen China adopt a highly reactive posture. This posture has evolved into one that is aimed at waging a long battle of attrition.
  • There is a disproportionate amount of importance attached to engagement between Presidents Trump and Xi, as the divergent distributions of power in the two countries’ political systems have often resulted in asymmetrical and ineffective negotiations.
  • Solutions in more contentious areas such as technology will remain at an impasse in future negotiations, as both sides regard the sector as core to their economic survival. Other issues, such as the trade imbalance, are more likely to be addressed.
  • A broader range of security, justice, and foreign affairs-related U.S. government bodies have joined in the dispute in recent months, suggesting that tensions are moving beyond just trade. This differs from earlier in the year when consultations were mainly led by the trade and commerce bodies of both countries.

2019 Outlook

At a macro-level, observers should anticipate a broadening of U.S.-China bilateral tensions which extend beyond trade. Additionally, though Washington and Beijing have bought 90 days to reach a negotiated settlement, the abbreviated timeline for trade talks suggests only a framework agreement will be possible.

Asymmetry of Expectations

China is unlikely to submit to U.S. demands for structural changes to its economic system, making only a framework agreement that nominally reduces the bilateral trade imbalance possible. Combined with the United States’ likely continuation of measures against Chinese technology policies, it is very likely that trade tensions and broader U.S.-China competition will continue long into 2019.

Systemic Risks

Some risks are unforecastable, given the incompatibility of the United States and Chinese political systems and significant domestic political pressures that could encroach on Presidents Trump and Xi. This political incompatibility and the possibility of domestic political “shocks” could either accelerate compromise or inflame tensions in unforeseeable directions.

Key Sectoral Risks

With the U.S. government fixated on national security concerns and Beijing on technological “self-reliance,” it will be difficult for both sides to reach an agreement that solves deep-seated concerns in ICT. It will be easier to achieve negotiated settlements over agriculture and manufacturing, due to their non-sensitive nature when compared with ICT.

APCO Risk Forecasting Team

The APCO Risk Forecasting Team has been following the trade war since it began. Based in Beijing, Shanghai, and Washington, D.C., the team utilizes a robust intelligence collection cycle that allows for forecasting and scenario planning.

The Team produces a macro-level weekly U.S.-China Trade Relations Intelligence Monitoring report for APCO clients.

The Team also offers tailored risk mitigation services for clients based around their specific operational needs, and has successfully helped companies navigate the evolving risk landscape in China by offering timely, actionable intelligence support, and contingency planning.

APCO’s risk planning can be augmented by our extensive public affairs capabilities, which can provide mitigation support for the identified risks and scenarios. This allows APCO to provide comprehensive business continuity support for companies that are directly affected by the ongoing U.S.-China trade frictions, improving their resilience and agility.

Download the report here (PDF) and view it below.
Contact Kaj Malden and Caroline Meinhardt for more information.


AnalysisTrade WarUS-China