Trump Trade War a Blessing in Disguise for China

Anyone who expects China to concede defeat in its trade war with the US should read about Biobase Group. The Chinese manufacturer of laboratory equipment once struggled to win orders even at home in an industry dominated by foreign products. But the company’s prospects have brightened as the trade war prompts customers to turn to domestic alternatives.

“The local market was heavily reliant on imports,” Biobase’s chairman was quoted as saying. “Now, it’s different. Opportunities beckon,” analyst Michael Schuman wrote for Bloomberg.

The story is from the state-run China Daily, so take it with a trailer-truck-sized grain of salt. But it makes an important point: The Chinese government is happy when its citizens buy locally made instead of American products.

Of the many misperceptions driving Donald Trump’s trade policy, this may be the most dangerous: China isn’t desperate to maintain its interdependent relationship with the US. Rather, it’s a national objective to become more economically independent.

That’s a quite different China than the one in Trump’s imagination. To the White House, the country is still so reliant on the US for growth and jobs that its leadership can be pounded into submission with tariffs.

In real life, Trump’s tariffs are unlikely to inflict enough pain on China to compel President Xi Jinping to make concessions. Its huge domestic market is becoming more important to Chinese growth.

But beyond even that, Beijing’s entire economic strategy is designed to replace critical foreign technology and products with homegrown alternatives it can control. Simply, the Communist Party prefers Chinese to buy Xiaomi phones and Geely cars, not iPhones and Buicks.

That’s exactly what the much-feared “Made in China 2025” program is all about. The plan is to develop new, high-tech industries to compete with and eventually replace foreign rivals, at home and abroad. In that sense, it’s official policy to limit overseas involvement in the economy.

The trade war, therefore, comes as a “blessing in disguise,” as the China Daily put it. Trump’s trade sanctions have given Beijing another excuse to drag its feet on free-market reforms, to support local companies and to harass and exclude foreign business—all things Chinese leaders are inclined to do anyway.

If anything, Trump’s tactics have only reinforced the critical importance of this quest for greater independence.

The bottom line is that China is content to go its own way on its own terms. Without Trump and the US.