We’ve heard a lot about the China-U.S. trade war from the U.S. side. President Trump and Vice President Pence have strongly criticized the Chinese for subsidized Chinese exports, theft of intellectual property, requiring U.S. companies in China to hand over trade secrets, currency manipulation and other unfair trade practices.

In his landmark speech on Oct. 4, 2018, Vice President Pence laid out these and many other violations of international agreements by China. Pence’s speech is generally understood as not being limited to the trade war, but being a declaration of a new cold war if China does not improve its behavior.

After these well-publicized critiques, what is China saying in its own defense? The news here is not encouraging.

As described in this article, China is showing no signs of a change in posture. In fact, China is digging in for a long struggle in which it rejects U.S. claims as an infringement of China’s “core interests.”

China has pivoted from talk about trade to discussion of territorial issues such as Taiwan and the South China Sea. China also rejects U.S. efforts to alter the behavior of China’s state-owned enterprises, SOEs, that compete in the private sector but are government owned, controlled and subsidized.

Both the U.S. and China are escalating their countervailing claims and rhetoric. The end of the trade war is not in sight. In fact, it is rapidly turning into a deeper competition that will slow global growth for years to come.

Investors are turning to cash, Treasury notes and gold as safe havens while these two global giants fight it out. That fight will continue and get worse.

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