As the trade war between the US and China escalates, with President Donald Trump imposing tariffs on $34 billion of Chinese imports, both sides are trying to portray themselves as victims of an unconstrained unilateralist rival. Theyre both wrong: This dispute is about something much bigger. For many years, American foreign policy adopted a fairly strong pro-China stance. The US was a major proponent of Chinas accession to the World Trade Organization and took no direct policy actions in response to its long-running manipulation of the yuan. It advocated for Chinas development and tried to integrate it into the broader international system, despite Chinas abuses in areas such as intellectual property. All along, Americas goal was to avoid conflict, get China to reform and open its economy, and assimilate it into a system built around open markets and liberal values. The problem was that China never really accepted this system. As Princeton professor Aaron Friedberg recently described the conflict: Americas post-Cold War strategy for dealing with China was rooted in prevailing liberal ideas about the linkages between trade, economic growth and democracy, and a faith in the presumed universality and irresistible power of the human desire for freedom. The strategy pursued by China’s leaders, on the other hand, was, and still is, motivated first and foremost by their commitment to preserving the Chinese Communist Party’s monopoly on domestic political power. A rapidly growing China that respected liberal norms and rules wouldve been widely welcomed. Europe, the US and Japan have all engaged in long-running disputes with each other, but they also share an understanding of what the rules are and an ultimate vision of more open markets. China doesnt share that vision; in fact, it sometimes expresses contempt for it. This is the fundamental issue dividing the two countries. Had Trumps administration entered into negotiations on these grounds, it wouldve had significant leverage. Almost no other country shares Chinas vision on these issues, and Americas many allies likely wouldve been willing to act as a united front if the US were pursuing coherent goals. Unfortunately, Trump seems to have lost the plot in this regard, focusing instead on issues such as the bilateral trade deficit and manufacturing jobs. His administration has also taken to referring to China as a "strategic competitor," thereby playing right into Chinas rhetoric. Faced with this more aggressive approach, China now says it will not negotiate with a "gun to its head" and state media argues that Washington is trying to prevent Chinas rise. That charge isnt true, but Trumps approach has given it more credibility. The good news is that both sides seem to be engaging in some introspection. Trump has given ZTE Corp. — which was rocked by US penalties after violating sanctions — at least a temporary reprieve and Chinas state media has been reflecting on the wisdom of closed markets. Despite the public bellicosity, both seem to realize theyre on a dangerous path. Even so, a resolution isnt obvious. If the dispute was simply over product subsidies or market access, a path forward could be reached. This is a much more fundamental conflict about values.(Bloomberg)