Negotiating Globally: The U.S.-China Trade War

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Donald Trump added to the controversy of his term in the U.S. Presidents office by starting a full-scale trade war against China. Trump ended Obamas strategy of putting pressure on China via high-level bilateral negotiations and indirect measures, such as the Trans-Pacific Partnership (TPP) project (Bown, 2021). Instead, the Trump administration acted unilaterally by imposing duties on Chinese goods. The first shot of the war was fired on 6 July 2018, when the U.S. placed 25 percent duties on approximately $34 billion worth of Chinese imports (Mullen, 2021). The Chinese government promptly retaliated by introducing a 25 percent tariff on 545 American products worth $34 billion (Kapustina et al., 2020). Both parties engaged in mostly fruitless negotiations throughout the rest of 2018 and the whole of 2019. Brief ceasefires were usually followed by new rounds of tariff increases and the inclusion of companies into the list of unreliable entities. A fragile stalemate was reached only by January 15, 2020, when Trump and Vice Premier Liu He, Chinas chief negotiator, signed the so-called phase one deal (Mullen, 2021). However, one can hardly claim that phase-one negotiations ended the war since the U.S.-Chinese conflict is inherently deep.

Negotiation Case Type and Context

The U.S.-Chinese negotiations during the trade war that resulted in the signing of the phase one deal can be defined as conflict management. One can argue that the trade war declared by Donald Trump can be considered an escalation of the brewing conflict between two global powers. Pruitt and Rubin (1986) defined conflict as a sharp disagreement that includes the divergence of interests or the belief that the parties aspirations cannot be achieved simultaneously (as cited in Ramirez Marin, 2019, p. 2). In this regard, one can claim that U.S. and China have entered a state of strategic conflict despite their strong interconnectedness within the global economy. Consequently, a trade war can be considered an episode of conflict escalation, whereas the negotiations can be perceived as an attempt to manage the conflict before it causes irreversible damage.

The concept of conflict management is predominantly used in the HR sphere. Total elimination of conflicts is virtually impossible and even unhealthy since disagreements are a natural part of openness and diversity (Doyle, 2020). Therefore, managers should develop skills that ensure the beneficial resolution of workplace conflicts. According to Doyle (2020), such skills include but are not limited to effective communication, emotional intelligence, empathy, and creative problem-solving. In general, conflict management can be described as making conflict a productive part of the workplace and eventually creating an environment where conflicts are accepted and used positively (Indeed, 2021). Overall, conflict management aims to turn tension between two parties into a starting point for healthy, mutually beneficial relationships, or at least prevent the conflict from worsening.

The strategic conflict between the two greatest powers of the modern era is significantly more complex and deep-layered than interpersonal or intergroup workplace conflict. Both parties eventually found that extra duties would hurt not only the rivals economy but also the domestic industries they were supposed to protect. According to Itakura (2020), new tariffs would result in a $317 billion real GDP fall in the U.S. and a $427 billion fall in China by 2035. In addition, the outcomes of the trade war could be unpredictable, up to the point of escalation into the new Cold War or even World War III (Kapustina et al., 2020). As a result, both U.S. and Chinese authorities saw the need for conflict management and more meaningful bilateral negotiations.

In 2019 Trump and Xi Jinping announced a new truce at the G20 summit. Later in 2019, the U.S. delayed a planned tariff increase on $250 billion worth of Chinese goods. Finally, by signing the phase one trade deal, China agreed to remove barriers to various U.S. exports, including agricultural products and pledged to purchase an additional $200 billion of U.S. goods. In return, the U.S. suspended a planned 15 percent tariff on $162 billion of Chinese goods and halved the 15 percent duty on imports worth approximately $110 billion (Mullen, 2021). However, the phase one deal merely transformed the conflict into a frozen state, where hostilities ceased, but tension continued existing. According to Bown (2021), Chinas imports of U.S. goods in 2020 were 42 percent lower than the phase one deal commitment. In March 2021, US Trade Representative Katherine Tai stated that U.S. tariffs on Chinese imports would remain (Mullen, 2021). Therefore, one can claim that U.S-Chinese negotiations during the trade wars active phase were an attempt to relieve the pressure and manage the conflict to a safer state rather than fully resolve it.

Five Building Blocks of the Case

The picture of the U.S.-China trade war can look deceitfully easy to understand. One can assume that President Trump was angered by what he perceived as unfair trading practices of the Chinese government and decided to retaliate. However, this assumption would be quite simplistic and shallow since the trade war and negotiation process around it were closely related to political, social, and ideological aspects. As such, it is necessary to analyze the negotiation case through the five building blocks framework in order to develop a complex understanding.

Parties

Negotiations around the trade war involved two superpowers of the modern era the United States and China. However, one can claim that countries merely represented two different worldviews shaped by visions of powerful political figures. For instance, the U.S. stance was primarily defined by Donald Trump, who promised to increase trade protection and drop out of unfavorable international agreements (Sukar & Ahmed, 2019). Chinese position was shaped by the views of Xi Jinping, who was ready to respond with fire and fury to any risks for the rejuvenation of the Chinese nation (Pauken II, 2019, p. 70). Therefore, negotiations around the trade war can be described as an attempt to alleviate tension between two conflicting worldviews.

Issues

Negotiations had to navigate through several serious issues that fuelled the war. Most importantly, President Trump intended to cut the $419 billion deficit in the U.S. trade balance with China. Trump also accused China of non-reciprocal trade policies and theft of intellectual property rights (Kalsie & Arora, 2019). Trumps accusations were legit to a certain extent, at least in part related to the nonreciprocity of the Chinese economy. According to Liu and Woo (2018), China continued to actively use WTO-sanctioned incentives for the developing countries, such as special protective tariffs, despite becoming the second-largest economy in the world. Overall, the situation in U.S.-Chinese trade relationships was heated due to the fundamental nature of the issues.

Positions-Interests-Priorities

The U.S. position during the hot phase of the war was clear China had to revise its trade policies or face the consequences. According to Kapustina et al. (2020), the U.S. strived to reduce the trade deficit, reduce Chinas high-tech capacity, prevent the growth of Chinese military strength and cut the federal budget deficit. The Chinese party took a defensive stance and tried to protect its push for progress and rejuvenation as China embraced ideas of prosperity and materialism (Pauken II, 2019). From the Chinese perspective, U.S. actions were perceived as an attempt to hinder the economic and technological development of the country.

Power

Both parties utilized economic leverage by targeting more vulnerable parts of the rivals economy and protecting domestic industries via tariffs and entity lists. For instance, the initial round of 25 percent duties on imports from China targeted cars, hard disks, and aircraft parts (Mullen, 2021). China responded by introducing similar duties on agricultural and aquatic products from the U.S. (Kapustina et al., 2020). When the U.S. added Huawei, one of the Chinese telecommunications giants, to the entity list and essentially banned U.S. companies from selling to Huawei without approval, China introduced its own unreliable entities list (Mullen, 2021). In this regard, one can conclude that background behind negotiations was unfavorable.

Target

Finally, both U.S. and China negotiated with primary strategic targets in focus. The Trump administration attempted to protect endangered U.S. hegemony by shifting from a liberal to a mercantilist economic perspective (Janusch & Lorberg, 2020). In contrast, China was willing to defend the current bilateral trade conditions, favorable for technological transfer and rapid economic development (Kalsie & Arora, 2019). Overall, the U.S. and Chinese strategic targets were mutually exclusive, so even the phase one agreement and certain concessions from both parties can be considered a success.

Negotiation Styles of the Parties

Negotiation styles utilized by the U.S. and China throughout the trade war can be analyzed through the dual concerns model. Initially introduced by Blake and Mouton (1964) and further developed by Thomas and Kilmann (1974), this model identifies two dimensions of behavior: assertiveness and cooperativeness (as cited in Awadallah, 2018, p. 256). Assertiveness can be defined as the intention to satisfy own concerns during negotiations, whereas cooperativeness is associated with the willingness to make concessions (Awadallah, 2018). Overall, the dual concerns model describes five distinctive negotiation styles based on the proportion between assertiveness and cooperativeness and the type of conflict resolution.

Competing Style

The competing style prioritizes assertiveness and relentless negotiation from the position of power. A demonstration of cooperativeness is undesirable since it equals weakness from a highly competitive perspective. According to Awadallah (2018), a party that uses the competing negotiation style pursues its interests at the other partys expense. Consequently, conflict transfers into a win-lose situation, in which one of the parties emerges victorious, and the opposition is defeated.

Accommodating Style

The accommodating negotiation style can be described as the exact opposite of the competing style. Whereas the competing style emphasizes assertiveness and neglects cooperativeness, an accommodating party cooperates to the point of sacrificing its interests in order to satisfy the partner (Awadallah, 2018). As such, the conflict turns into a lose-win situation, where one of the parties admits defeat willingly and agrees on potentially unfavorable conditions.

Avoiding Style

The avoiding negotiation style is both unassertive and uncooperative; a party that chooses it is unwilling or not ready to pursue its interests but at the same time does not want to submit to others demands. According to Awadallah (2018), avoiding style manifests in diplomatic sidestepping, postponements, or total withdrawal from threatening situations. In the end, avoidance leads to a lose-lose situation for both parties.

Collaborating Style

The collaborating negotiation style is characterized by simultaneous assertiveness and cooperation, as both parties actively try to achieve the best possible solution. Collaboration requires extensive and mutual digging into the essence of the conflict (Awadallah, 2018). However, the effort is worth trying since the conflict ends with a win-win situation, provided both parties demonstrated goodwill and worked hard to find an alternative that addresses concerns from both sides.

Compromising Style

Finally, the compromising style incorporates features of competing and accommodating approaches, as parties are willing to make mutual concessions. At the same time, compromising has a certain commonality with collaborating; however, the parties do not address the issue as profoundly (Awadallah, 2018). As a result, the compromising style of negotiation usually leads to a no-win-no-lose outcome, in which an agreement partially satisfies the initial demands of both parties.

Considering this classification of negotiating styles, one can argue that U.S. and China changed several negotiating styles during the trade war. Initially, both parties used competing style and bombarded each other with new rounds of duties and restrictions. Donald Trump took a competing stance because he perceived the growing deficit in trade with China as a sign of loss in a zero-sum game (Janusch & Lorberg, 2020). As a result, Xi Jinping responded symmetrically in order to prove that China is not afraid to fight back if necessary (Pauken II, 2019). However, as the harm became evident and no clear winner had emerged, both Trump and Xi had to seek compromise and found it in the form of the phase one deal. Nevertheless, U.S. and China still struggle for power in the modern world, so the Biden administration does not take extra steps toward reconciliation. Since the U.S. currently refrains from removing the duties introduced by Trump, China has a justification for avoiding the issue in a similar manner. As a result, the trade war has turned into a frozen conflict between two superpowers.

Impact of Informational Complexity

Informational complexity can severely impact negotiations that involve multiple parties and stakeholder groups. According to Schweinsberg et al. (2022), informational complexity may lead negotiations to an unwanted impasse. An excess of irrelevant information brought by various parties may hinder information exchange and prevent negotiators from making the tradeoffs necessary for reaching an agreement (Schweinsberg et al., 2022). In addition, informational complexity makes prioritizing more difficult, as the parties have to consider a broad spectrum of considerations and potential consequences.

Regarding the U.S.-China trade war, one can argue that the informational complexity was not an issue due to the bilateral format of negotiations and the clarity of its subject. However, tariffs and entity lists were merely one of the aspects of trade war rather than its sole factor. For instance, the U.S. alone attempted to address the following matters trade deficit, reciprocity of trade practices, cybersecurity, intellectual property protection, and long-term challenges for the global economy (Kalsie & Arora, 2019). The Chinese party had an easier task, as China mostly responded to the competing approach and mirrored the measures implemented by the Trump administration. Nevertheless, both parties had to settle for a compromise on multiple sensitive matters directly related to national interests and security. In this regard, one can claim that informational complexity affected negotiation outcomes and forced the parties to sign a fragile ceasefire rather than work together to resolve the issues.

In the U.S.-China trade war example, one can see how informational complexity brings additional issues and perspectives to the initial subject, thus increasing negotiation difficulty. Therefore, the negotiation team should be prepared to mitigate the adverse effects associated with informational complexity. Wenner (2017) provides recommendations helpful in conducting negotiations that involve multiple parties and subjects. In the prenegotiation stage, a party must decide who will represent it, define the roles of selected negotiators, and gather comprehensive information on the subject in order to construct a compelling agenda (Wenner, 2017). In particular, excluding negotiators who may bring irrelevant information into the discussion may be beneficial. Additionally, assigning a specific negotiator to observation duty may provide valuable insight into the other partys behavior and intentions.

In the formal negotiation stage, selected negotiators control the information flow and resolve the emerging complexity. In particular, discussing alternatives and perspectives within the team may assist in reaching a favorable outcome (Wenner, 2017). Small negotiation teams may become overwhelmed by informational complexity; however, mutual support would alleviate the potential adverse impact. Lastly, the team should be ready to encounter new, unexpected information during negotiations (Wenner, 2017). Overall, the teams participating in multilateral or otherwise difficult negotiations should always be prepared to face and handle informational complexity without losing focus.

Five Steps to Resolve Disputes Through Negotiations

The inevitability of conflicts makes the ability to resolve disputes through negotiations a vital skill. Negotiations happen everywhere from school, family, and workplace to international summits. The context and importance of negotiations may vary, but the skills needed to negotiate successfully remain relatively constant. Cochran (n.d.) summarized the negotiation process in five steps; this algorithm may seem more suitable for prolonged business or political negotiations, but it may also help in simpler circumstances. Following these steps significantly increases the likelihood of a satisfactory outcome.

Preparing, Probing, and Proposing

Participating in negotiations is quite similar to building a house since success in the negotiation process requires a sturdy foundation. Preparing, probing, and proposing allows a negotiator to gather relevant information and lay the needed stepping stone. The negotiator answers critical questions such as who is involved in the conflict, where it started, and why it is an issue for both parties (Cochran, n.d.). As a result, it becomes possible for the negotiator to propose preliminary solutions.

Defining Ground Rules and Exchanging Information

In the second step of the process, a negotiator contacts the other party and establishes the terms of the future negotiations. In addition, both parties obtain better knowledge about each other through exchanging information. According to Cochran (n.d.), the second step serves to gain trust, build an atmosphere of honesty and credibility, and establish the path to more formal negotiation. Therefore, this step allows the negotiator to make a good impression on the partner.

Clarification

The third step finalizes the preparatory process as both parties clarify their positions. Clarification allows a negotiator to obtain potentially important details regarding the other partys stance (Cochran, n.d.). In addition, this step offers the last chance to gain insight into any evidence the other party provides or even elicit information regarding the favorable outcome from its perspective (Cochran, n.d.). Overall, clarification serves as an important transition to actual negotiations.

Bargaining and Problem Solving

Once three preparatory steps are complete, negotiations begin as the parties propose their solutions and listen to counterproposals. During this step, each party reveals its concerns and perceived ways of resolving the conflict (Cochran, n.d.). This process may differ in duration depending on the conflicts significance. As such, it is crucial to refrain from rushing ahead and remember the ultimate goal of resolving the dispute in a satisfactory way.

Concluding and Implementing

Finally, negotiations come to a conclusion, preferably with a mutually beneficial agreement. In the final step, the parties develop a mechanism that ensures an official implementation of negotiated terms (Cochran, n.d.). In the world of international business or politics, this step usually involves signing legally binding contracts or treaties. The simpler interpersonal disputes between co-workers or family members may be settled through oral declarations and sincere promises made in good faith.

Conclusion

The U.S.-China trade war serves as a fine example of complex international negotiations in a heated context. The U.S., represented by President Trump, took an aggressive competing stance and put significant pressure on the Chinese economy. China retaliated instead of making concessions, which forced both parties to enter negotiations and look for a compromise. Difficult negotiations that touched on multiple aspects beyond bilateral trade relationships resulted in a phase one deal. The deal transformed the trade war into a frozen state, showing that sometimes negotiations cannot yield a win-win solution. Overall, one cannot expect to achieve favorable outcomes and win every time, especially if the conflict is significant, deep, and multidimensional. However, careful preparation for the negotiation process can increase the likelihood of getting better results and improving relationships with opposing party.

References

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