How to Avoid Trade Wars—and World War III
Under the influence of the neocons, Democrats and Republicans alike have marched America into one disaster after another, in a vain effort to defy the economic tides by which all great powers rise and fall. Trump and his team are no exception.
Not a day goes by without a new shock to Americans and our neighbors around the world from the Trump administration. On April 22nd, the International Monetary Fund (IMF) downgraded its forecasts for global growth in 2025, from 3.3% to 2.8%, and warned that no country will feel the pain more than the United States. Trump’s policies are expected to drag U.S. growth down from 2.7% to 1.8%.
It’s now clear to the whole world that China is the main target of Trump’s trade wars. The U.S. has slapped massive tariffs—up to 245%—on Chinese goods. China hit back with 125% tariffs of its own and refuses even to negotiate until U.S. tariffs are lifted.
Ever since President Obama announced a U.S. “pivot to Asia” in 2011, both U.S. political parties have seen China as the main global competitor, or even as a target for U.S. military force. China is now encircled by a staggering 100,000 U.S. military personnel in Japan, South Korea and Guam (plus 73,000 in Hawaii and 415,000 on the U.S. West coast) and enough nuclear and conventional weapons to completely destroy China, and the rest of us along with it.
To put the trade war between the U.S. and China in context, we need to take a step back and look at their relative economic strength and international trading relations with other countries. There are two ways to measure a country’s economy: nominal GDP (based only on currency exchange rates) and “purchasing power parity” (PPP), which adjusts for the real cost of goods and services. PPP is now the preferred method for economists at the IMF and OECD.
If the U.S. keeps trying to bully its way back to the top, we could all lose everything.
Measured by PPP, China overtook the U.S. as the largest economy in the world in 2016. Today, its economy is 33% larger than America’s—$40.7 trillion compared to $30.5 trillion.
And China isn’t alone. The U.S. is just 14.7% of the world economy, while China is 19.7%. The EU makes up another 14.1%, while India, Russia, Brazil, Japan, and the rest of the world account for the other 51.5%. The world is now multipolar, whether Washington likes it or not.
So when Malaysia’s trade minister Tengku Zafrul Aziz was asked whether he’d side with China or the U.S., his answer was clear: "We can’t choose—and we won’t." Trump would like to adopt President Bush’s “You’re either with us or with the terrorists” posture, but that makes no sense when China and the U.S. together account for only 34% of the global economy.
China saw this coming. As a result of Trump’s trade war with China during his first term in office, it turned to new markets across Asia, Africa, and Latin America through its Belt and Road Initiative. Southeast Asia is now China’s biggest export market. It no longer depends on American soybeans—it grows more of its own and buys most of the rest from Brazil, cutting the U.S. share of that market by half.
Meanwhile, many Americans cling to the idea that military power makes up for shrinking economic clout. Yes, the U.S. outspends the next ten militaries combined—but it hasn’t won a major war since 1945. From Vietnam to Iraq to Afghanistan, the U.S. has spent trillions, killed millions, and suffered humiliating defeats.
Today in Ukraine, Russia is grinding down U.S.-backed forces in a brutal war of attrition, producing more shells than the U.S. and its allies can at a fraction of our cost. The bloated, for-profit U.S. arms industry can’t keep up, and our trillion dollar military budget is crowding out new investments in education, healthcare, and civilian infrastructure on which our economic future depends.
None of this should be a surprise. Historian Paul Kennedy saw it coming in his 1987 classic The Rise and Fall of the Great Powers. Every dominant empire, from Spain to Britain to Russia, eventually confronted relative decline as the tides of economic history moved on and it had to find a new place in a world it no longer dominated. Military overextension and overspending always accelerated the fall.
“It has been a common dilemma facing previous ‘number one’ countries that even as their relative economic strength is ebbing, the growing foreign challenges to their position have compelled them to allocate more and more of their resources into the military sector, which in turn squeezes out productive investment…,” Kennedy wrote.
He found that no society remains permanently ahead of all others, but that the loss of empire is not the end of the road for former great powers, who can often find new, prosperous positions in a world they no longer dominate. Even the total destruction suffered by Germany and Japan in the Second World War, which ended their imperial ambitions, was also a new beginning, as they turned their considerable skills and resources from weapons development to peaceful civilian production, and soon produced the best cars and consumer electronics in the world.
Paul Kennedy reminded Americans that the decline in U.S. leadership “is relative not absolute, and is therefore perfectly natural; and that the only serious threat to the real interests of the United States can come from a failure to adjust sensibly to the newer world order…”
And that is exactly how our leaders have failed us. Instead of judiciously adapting to America’s relative decline and carving out a new place for the United States in the emerging multipolar world, they doubled down—on wars, on threats, on the fantasy of endless dominance. Under the influence of the neocons, Democrats and Republicans alike have marched America into one disaster after another, in a vain effort to defy the economic tides by which all great powers rise and fall.
Since 1987, against all the historical evidence, seven U.S. presidents, Democrats and Republicans, have blindly subscribed to the simplistic notion peddled by the neocons that the United States can halt or reverse the tides of economic history by the threat and use of military force.
Trump and his team are no exception. They know the old policies have failed. They know radically different policies are needed. Yet they keep playing from the same broken record—economic coercion, threats, wars, proxy wars, and now genocide—violating international law and exhausting the goodwill of our friends and neighbors around the world.
The stakes couldn’t be higher. It took the two most deadly and destructive wars in human history to put an end to the British Empire and the age of European colonialism. In a nuclear-armed world, another great-power war wouldn’t just be catastrophic—it would very likely be final. If the U.S. keeps trying to bully its way back to the top, we could all lose everything.
The future instead demands a peaceful transition to international cooperation in a multipolar world. This is not a question of politics, right or left, or of being pro- or anti-American. It’s about whether humanity has any future at all.
