Trade Tensions and US Soft Power

The era of “de-risking”

The world is entering an era of de-risking. One of the risks of de-risking is it being turned into larger scale decoupling, de-globalization, and dislocation. In this context, this paper will discuss research findings on how the U.S. trade war against China that was started in March 2018 may have affected U.S. soft power as proxied by the viewership of U.S. movies and sales of U.S.-brand automobiles in China.

U.S. share of sales in the world and China

U.S. movies account for 77% of global movie sales in dollar amount with a slight decline in recent years to 67%. in contrast, the U.S. has the world’s largest military and its military expenditure is greater than the sum of the next seven military powers combined, but that amount accounts for 30% of military expenditures globally, so the dominance in the film realm is quite striking. Additionally, U.S.-origin foreign direct investment (FDI) is 27% of global FDI; the U.S. GDP is around 18% of global GDP; and U.S. imports as a share of global imports and U.S. exports as a share of global exports are at 10% or lower. Relative to even those hard military and economic powers, U.S. movies are extremely prominent in global movie scene. So, revenue from U.S. movies in China relative to all non-Chinese movie revenues in China from 2012 to more recent years is around 80%. Similarly, all Chinese exports to the U.S. as a share of all Chinese exports and all Chinese imports from the U.S. as a share of all Chinese imports are on the order of 27% or lower. The U.S. FDI in China as a share of all FDIs in China is a lower number at 10%.

Movie revenue by country as total foreign movie revenue in China

Relative to those measures, U.S. movies are extremely dominant in the Chinese movie scene. In comparison, movies from virtually any other country as a share of all foreign movies in China is a much lower number. Therefore, despite all the tensions one reads and hears about, U.S. movies are extremely popular. It’s partly a market outcome, and it’s not unique to China.

U.S. movies and products as a form of soft power

The top 15 best-selling automobile brands last year in China contained many foreign-brand products. Given that the automobile sales are important big-ticket consumer products, automobiles could also carry soft power. Movies perhaps are more direct. Other U.S. products are somewhat less direct, but they partially reflect the soft power component. U.S. movies are a special case of creative products and have been recognized by many experts as an element of U.S. soft power. As soft power, they help to spread U.S. values, U.S. interests, knowledge about U.S. institutions and history, and sympathy and potential buy-ins for the U.S. worldview.

Professor Joseph Nye Jr. defined soft power as “the ability of a country to attract or co-opt others to get desired outcomes rather than coercing with threats or inducing with payments.” In his books, he often mentioned U.S. movies as a particular example of soft power. Soft power can potentially extend or complement U.S. hard power in military and economic might. Therefore, the influence going through Hollywood to the world is also an important source of soft power.

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