An unforeseen consequence of the ongoing trade war between China and the USA is a potential rise in pollution in China this winter. As China’s policy makers aim to boost China’s economic performance following an economic downturn blamed on the trade war, they have said “bye bye” to pollution control as they dial up the output of factories to ten.

Previous plans to curb steel production and coal use in a bid to reduce air pollution, which worsens in winter months, have been scrapped. China’s northern cities rely heavily on coal-fired power and last year steel producers in four major cities were forced to half their output during winter months and reduce their coking coal by a third. Another 28 cities were also forced to cut steel and aluminium output.

This winter, guidelines have indicated less stringent caps and levels of PM2.5 particulate matter must be cut by only three rather than five percent. The easing may have been prompted by a public outcry, claimed the Financial Times. “Winter curbs on coal, including on heaters used by many residents in smaller cities and villages, left millions freezing as local governments scrambled to provide gas heating.  By imposing emissions targets rather than specific production cuts, China shifted responsibility to local rather than central officials which could also weaken enforcement,” it wrote.

They have said “bye bye” to pollution control as they dial up the output of factories to ten

Elsewhere, a huge deal agreed to provide China with affordable, clean, Liquefied Natural Gas (LNG) looks to be on the rocks. China agreed to invest $43 billion into a LNG project in Alaska during Trump’s visit to China last year. Since 2016, the US has seen a boom in shale gas, leading to an abundance of LNG. This glut of cheap LNG would help wean China off dirty coal and was seen as a win-win but the growing trade war has led to China imposing a 10 percent tariff on $60 billion of goods, including LNG.

China is the second-largest buyer of LNG globally but has dialled back its purchases from the US, turning instead towards Qatar, Australia and Russia. An unfortunate consequence is that China will continue to rely more on coal than it had planned.

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Friction between the world’s two largest economies continues after Vice President Mike Pence accused China of meddling in the upcoming US Mid Terms. Russian interference in US elections “pales in comparison” with Chinese meddling, he claimed, following similar accusations by US President Donald Trump earlier in the summer.

No evidence was given for the accusation and cybersecurity experts contradicted the claims. Even the administration’s own secretary of homeland security, Kirstjen Nielsen, said: “We currently have no indication that a foreign adversary intends to disrupt our election infrastructure.”

The US doubled down when Secretary of State Mike Pompeo said that China and the US are in “fundamental disagreement,” during a tense visit to Beijing last month. Standing next to Pompeo, Chinese foreign minister Wang Yi said that “a direct attack on our mutual trust has cast a shadow on US-China relations.”

Security talks between the US and China planned for October were cancelled, with both sides blaming the other. This may have been due to the escalating trade war, the tense discussions over election tampering or perhaps the US Navy’s incursion into the South China Sea. The guided-missile destroyer USS Decatur sailed within 12 nautical miles of the Gaven and Johnson Reefs in the Spratly Islands as part of what the US Navy calls “freedom of navigation operations.”

It was later leaked that the US Navy was recommending the US Pacific Fleet conduct a series of operations during a single week in November as a major show of force to warn China. The exercise, it was reported, would involving US warships, combat aircraft and troops to demonstrate that the US can counter potential adversaries quickly on several fronts.

Meanwhile, Bloomberg claimed that China has inserted spy-chips in servers used by Amazon and Apple, allowing a back door to access computers and data – something Amazon, Apple and China have denied.

China needs to act globally if it wants to play globally

All in all, it’s been a tough couple of months for US-China relations. Accusations have been flying, both sides’ propaganda machines are working at full pelt and serious warning bells are ringing that suggest things could turn even nastier.

Trump has followed through on his tough stance on China that he promised during this election campaign. China, he says, has been stealing US jobs and unfair trade rules have led to the current US-China trade deficit. China has also been caught out, surprised that Trump has followed through on his threats of sanctions and tariffs, whilst gloating that the west’s democratic system has failed. Both sides need to work together to find a solution rather than continuing to spiral further and further apart.

Trump’s incessant desire to look to the past and to revive dying industries rather than promote new technologies, means that he is allowing China to leapfrog the US when it comes to new industries such as green-tech, fin-tech and AI. On the other hand, China positions itself as a paragon of free trade and globalisation, whilst restricting foreign competitors and subsidising domestic firms. It needs to act globally if it wants to play globally.

Trump thinks that trade is a zero-sum game. If one party is doing badly, it’s because the other is doing too well – trade is a war, which will be won or lost. This is not how trade works but China, who need to portray a strong image domestically and is not comfortable losing face on the world stage, is ready and willing to go head to head.

The repercussions of an escalated trade war are not inconsequential. All diplomacy is manifestly intertwined. Trade talks are held alongside discussions on other important subjects and sadly, urgent matters have been brushed to the side as trade dominates the time and energy of both the civil servants and the press. Human rights issues seem to have totally fallen off the agenda at a time when they are needed more than ever, and the environmental knock-on effects are becoming increasingly apparent. It is in the interest of not just the two countries involved but the world as a whole to start to find a compromise that will de-escalate the trade war before the two sides come to blows and the rest of the world is caught in the crossfire.

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It’s pretty challenging to keep up to speed with the current pace of President’s Trump’s trade talks. His penchant for late night tweets, often shifting major trade policies at the stroke of a few keys, has kept not just commentators and journalists on their toes but also global leaders. Presidents, dictators, friends and foes – few have any idea what the US President might do next and, therefore, the global ramifications his actions might cause.

Just last month, economist Andrew Collier wrote for FOCUS about the US-China trade war. The preceding weeks have already made it look vastly outdated.

To look at just some of the events of the last weeks: Chinese tech company ZTE were first blacklisted from America after being accused of being a threat to American state security and in breach of US embargoes. Days later, Trump then pledged to save the company from going under. The cost to the American supply chain was the reason given for Trump’s change of mind, but America’s reliance on China for support in negotiations with North Korea likely also proved significant.

“Trump accused Xi of being a world class poker player, perhaps he is finally realising that it’s not the USA that has the best hand”

Talks with North Korea’s leader Kim Jung Un were put on hold again last month after he accused American politicians of threatening behaviour when they compared the North Korean situation to that of Libya last decade. Commentators have suggested however that it was President Xi who encouraged Kim to take a harder stance following a meeting between the two Asian leaders in Dalian last month.

Is China, in fact, pulling the strings behind Kim’s actions?  There are certainly advantages if they can play a role in determining how talks play out between the US and North Korea. China are happy to use North Korea as a bargaining chip and then utilise this as leverage with America when it comes to their own negotiations – giving themselves better terms on trade deals for example.

Combining trade deals and politics has traditionally been avoided for exactly this reason. Dealing trade for trade is one thing but trade for politics is another. It also is something that is new to President Trump but something China is well versed in. Last month, Trump accused Xi of being “a world-class poker player” – perhaps he is realising that it’s not the USA that is holding the best hand.

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