The news that China is tipping into deflation poses many challenges. But it could contain at least one unappreciated benefit for the world. The travails besetting China’s economy may well derail what a growing number of observers see as an “inevitable” path to a U.S.-China war.
Scholars and pundits have highlighted a potentially catastrophic dynamic known variously as a “power transition,” “commitment problem” or more recently as “the Thucydides Trap.” This theory predicts war between countries as they transition in relative power. The prospect of China and the United States, the two largest economies in the world, facing off against each other --- with their respective nuclear arsenals --- is more than a bit disconcerting. Fortunately, the danger of war, at least in the form attributed to Thucydides, may just have passed.
The term “Thucydides Trap” was coined by Political Scientist Graham Allison, who shamelessly rebranded an extensively researched phenomenon as his own in a series of articles and a 2017 book. Prior to discovering the China threat, Allison anticipated another form of doom: “nuclear terrorism is not just inevitable, but more likely than not in the decade ahead.” In the almost two decades since Allison wrote these words, we have been fortunate that he was wrong.
A power transition, or Thucydides Trap, is a claim about the timing of a major war. A powerful but declining nation may have strong incentives to attack a rising challenger while there is still time—while the declining state continues to be more powerful than its challenger—rather than waiting and suffering the consequences of its decline. This seems on its face to be an important and salient warning about Sino-U.S. relations. As Allison puts it, “judging by the historical record, war [between China and the United States] is more likely than not.”
But let us remain mindful of Dr. Allison’s penchant for “more likely than not” predictions. It is hard to be right when one’s explanation is cursory. Allison commits a leap of logic that is almost pro forma among American academics studying international relations, a combination of post hoc fallacy and conflating necessary and sufficient conditions. Just because something may cause a war, does not mean it must cause a war. Indeed, the conditions Allison refers to (power transition) are ubiquitous, occurring relatively frequently in world affairs, mostly without wars.
What leads some power transitions to be peaceful, while others are not? The most obvious factor is that the two states have no particular reason to want to fight each other. This could be the reason that, for example, the United States and the United Kingdom did not come to blows in the early 20th Century. Those paying attention will note that America’s first wars were with the British, but these were not between a declining state and a rising challenger. In the early years of the Republic, the United States had no ability to overthrow British power globally (only locally). Later, circumstances changed to the point that America had no particular interest in opposing British interests around the world when on the brink of superseding British power.
Regrettably, this solution to Thucydides’ trap does not appear viable in relation to China and the United States. Tensions between the two countries are more than apparent. Indeed, the United States and China are already in a “war” of sorts concerning their commercial relations. President Trump imposed wide-ranging sanctions on China over a series of issues. These have been maintained by the Biden administration. If there is a single bipartisan foreign policy issue uniting the fractured political landscape in the United States, it is growing distrust of China.
Similar anxieties about China have engulfed a growing number of nations. In part, this is an outgrowth of Russia’s invasion of Ukraine, but it also reflects rising global disenchantment with rosy predictions about the benefits of trade with China. The PRC has managed to degrade the trust between itself and other nations. A recent Pew public opinion survey reported that an average of two-thirds of the respondents in a 24-country sample viewed China unfavorably.
And yet, it is precisely the ongoing trade war that offers what may be a glimmer of hope for peace in the Pacific, at least in terms of the Thucydides trap. There can be no trap if there is no transition. War between China and the United States, which of course may still take place for other reasons, cannot occur as Allison predicts if China starts to lag behind economically.
War is a process of competitive harming, intended to drag an opponent to the bargaining table or to weaken them so that they can no longer resist (as effectively). A trade war can do much the same thing as a real war, but absent the violence. In contrast to most of the cases Allison examines, the United States and China are heavily interdependent economically, with China depending on trade with the United States more than the reverse. This means that the two countries can harm each other through commerce, rather than with guns or nuclear weapons.
U.S. sanctions were initially imposed on China to compel it to liberalize, but the greatest impact may be in blunting China’s growth. China is facing a series of dramatic economic ailments, not least of which is growing resistance from its trade partners to its mercantilist economic policies. As central banks around the world are fighting inflation, China is experiencing deflation. China’s real estate market has also imploded. Beijing’s supply-side interventions are simply forestalling a period of stagnation. And this is consequential; where real estate represents perhaps 5% of mature economies, it is roughly 30% of China’s economy. The PRC has also implemented a raft of revisionist ideological and regulatory changes designed to solidify Xi Jinping’s rule that have frightened foreign firms and led some domestic producers to look abroad. Add suspect official statistics and endemic corruption to measures blocking technology transfers from the West and China’s record of unprecedented growth looks more likely to stagnate than persist. Indeed, recent data shows that Chinese exports and foreign direct investment are in decline.
The ongoing trade war is only one piece of the picture. But it may turn out to be an important element. Rather than war becoming inevitable, we may have won a peace with China by means of a vigorous and proactive economic policy that is defensible, sustainable and nonviolent, one that may in the end defang Thucydides’ apocryphal “prediction,” rather than falling for the trap.
Erik Gartzke is professor of political science and director of the Center for Peace and Security Studies at the University of California at San Diego.