Trump on China in 2018: Lover or Hater?

If the U.S.-China relationship could be characterized as a see-saw between cooperative and competitive elements, the relationship has avoided a hard crash for most of the past 40 years. 2018 could be different. The U.S.-China see-saw could land on the competitive side in the year ahead. Here are a few reasons why:

1. The public mood in the United States is turning negative toward China. The U.S. business community no longer is a stalwart supporter of closer ties. The same is true with the expert community. There are few in Congress that see benefit in speaking in support of closer ties. At the same time, President Trump appears to be reverting to his long-held views of China as a predatory trade partner that robs American workers of jobs. Trump’s reversion to his long-held convictions likely will accelerate as the prospect of breakthrough U.S.-China cooperation on North Korea becomes more distant, and as midterm Congressional elections in the U.S. near.
2. Rising tension on the Korean Peninsula will further expose the gaps between Washington’s and Beijing’s prescriptions for dealing with the nuclear challenge. Beijing advocates for the U.S. and North Korea to take reciprocal steps to lower tensions. Washington rejects Beijing’s proposal, viewing it as an effort to pass the buck to Washington, when Washington believes such responsibility lies with Pyongyang (and Beijing). Beijing prefers to take a patient approach and steadily nudge Pyongyang toward denuclearization. Washington views North Korea as an urgent and existential threat and believes “time is running out” to find a peaceful solution.
3. With public attitudes toward China souring and prospects for breakthrough cooperation with China on North Korea dimming, the odds of President Trump taking unilateral trade actions against China are rising. President Trump likely views trade action (e.g., tariffs, import restrictions, tighter screening of inbound Chinese investment) as a promise in need of keeping, given his campaign pledge to deliver a more equitable and beneficial trading relationship with China. The fact that the U.S.-China trade deficit has grown under Trump’s watch likely will feed his impulse toward action.
4. At the same time as areas of U.S.-China friction are piling up, areas of U.S.-China cooperation are receding. Gone are the days when the U.S. and China led together on climate change, peacekeeping, Iran, or public health. As a consequence, the relationship increasingly is becoming defined by areas of friction, and less so as a mixture of cooperation and competition. This shift was given expression in President Trump’s recently published National Security Strategy, which described China (along with Russia, North Korea, Iran, and terrorist organizations) as the principal threats to the United States.
5. The U.S.-China bilateral calendar may be less favorable in 2018 than in previous years. Previously, senior-level engagements served as a stabilizing force in the bilateral relationship, helping to clarify intentions, mitigate risk of miscalculation, and limit the possibility of rapid escalation during periods of tension. The National Security Strategy cast doubt on the overall usefulness of engagement with China. Unlike 2017, there are not currently plans for the two leaders to travel to each other’s countries for meetings in the year ahead, and no meetings between the two leaders presently are on the books.

To be sure, China’s conduct has contributed toward driving the relationship to this point. There have been substantial shortcomings in China’s actions, ranging from its mercantilist trade policies, its coercion against U.S. allies, its withholding of the types of pressure necessary to change Pyongyang’s calculus, and its actions at home to stifle dissent and privilege internal security above all else. At a broader level, China’s rapid accumulation of wealth, influence, and might have accelerated a reordering of power between the two powers, which has shaken the foundation of the bilateral relationship.

In light of all of this, new creativity and fresh thinking will be needed in the coming year to chart a path forward for the U.S.-China relationship, a relationship that remains the most consequential in the world. As policymakers in both capitals grapple with this challenge, it would be wise for them to conceptualize what they would like to build up, and not just what they seek to tear down.

The great Russian playwright Anton Chekhov is supposed to have said that a gun that is introduced in the first act must be fired by the third. Fortunately, the same rule does not always apply in international relations.

During his first year in office President Trump issued an assortment of blood-curdling threats, including promising to rain down “fire and fury” on North Korea and indicating a willingness to take drastic action, even at the risk of triggering a trade war, to correct what he has described as a “very one-sided and unfair” economic relationship with China.

In the coming year, Trump is far more likely to follow through on the second threat than on the first. Launching a preemptive attack on North Korea, whether it was intended to destroy key elements of its nuclear and ballistic missile programs or, as some press accounts have suggested, to give the Kim Jung-un regime a “bloody nose,” would carry enormous risks. Even if such a strike succeeded in achieving its immediate objectives, Pyongyang might respond by unleashing a massive artillery barrage across the demilitarized zone, or using special forces, and perhaps chemical and biological weapons, to wreak havoc on South Korea. Because no one can say with assurance that this will not be the case, the government in Seoul is extremely unlikely to give its approval for a preemptive attack. If the Trump administration were to go ahead and launch one on its own, the results would likely include the end of the U.S.-South Korea alliance and a significant weakening in the American strategic position in Asia. In the end, these considerations will probably prevail. Because it has likely already concluded that this is the case, Beijing will continue to apply only a fraction of the potential leverage it has over Pyongyang. Trump’s frustration will grow and U.S.-China friction over this issue will increase, but not to the point of combustion.

Trade is another matter. Since taking office, the Trump administration has set in motion a variety of investigations, including into China’s alleged dumping of solar panels, the impact of steel and aluminum imports on the American defense industrial base, and the economic consequences of the massive theft and forced transfer of intellectual property from U.S. companies to their Chinese competitors. In the coming months, the White House will receive the results of these investigations and it will have to decide whether, and if so how, it wishes to respond. Assuming that proposed legislation passes the Congress and is signed into law, the administration will also soon have new tools with which to restrict Chinese direct investment in sensitive sectors of the U.S. economy. After a lengthy build-up and much rhetoric, some kind of action on these fronts is virtually inevitable. What remains to be determined is how broad and how aggressive those measures turn out to be and how China will react. Here too, Chinese decision-makers have probably already read the tea leaves, are anticipating U.S. action, and contemplating their options. Not wishing to upset what it knows to be a highly favorable economic relationship, Beijing could choose to do relatively little in response to what it perceives to be largely symbolic and politically motivated moves by the United States. If it concludes that the Trump administration is really serious, however, it will have to decide whether it wants to make substantial changes in its own policies (cutting back on subsidies to export industries, for example, or loosening restrictions on U.S. investment in China) or to retaliate in kind. Unfortunately, given the depth of the regime’s commitment to its current, heavily statist, and essentially mercantilist approach to sustaining economic growth, the latter course seems more likely than the former.

Over the past year, we were much carried away by the many off-script remarks and dramatic tweets from President Trump. His comments on China, like his comments on other topics, are far from stable, sometimes showing love and sometimes showing hate of the country. But regarding U.S.-China policy, some larger, more structural forces are at work. I share the assessment of Ryan Hass and Aaron Friedberg that U.S.-China relations are likely to get worse in 2018, particularly on the trade front. This trend is going to be very difficult to stop.

American business’ frustration with China has been worsening for a while. The latest AmCham China survey of its members, published in January 2017, shows that eight out of 10 respondents feel foreign companies are less welcome in China than in the past, and more than 60 percent have little or no confidence that the Chinese government is committed to opening China’s markets further in the next three years. The share of companies saying China is a top-three global priority dropped to 56 percent from a peak of 78 percent in 2012. Worse, research shows that some American corporations that feel cheated or squeezed out of China unfairly are starting to coalesce into an incipient “anti-China corporate insurgency,” actively lobbying Congress to support anti-China legislation (such as the bills that attempt to designate China as a currency manipulator and seek retaliatory actions). Given this shift, the enthusiastic corporate lobby that has been effectively smoothing U.S.-China relations and restraining any unfriendly action on China from inside Washington for the last two decades is now much weaker. This means the Trump administration’s bellicose approach to goods and investment from China will face far less resistance from the corporate sector, or even receive support from the sector. Washington’s hardening position on China is even echoed by many European governments, which are at odds with the Trump administration on many other issues such as climate change. European corporations have been feeling similar frustrations with China, and the E.U. is in line with the U.S. in seeking denial of China’s market economy status at the W.T.O.

At the same time, the revelation since the late Obama administration that Chinese companies have been covertly aiding North Korea’s nuclear program renders obsolete the “accommodate China economically in exchange for its help over North Korea” line, which dominates Washington’s post-Cold War China policy for decades. South Korea’s seizure of a Hong Kong tanker that allegedly violated U.N. sanctions by transferring oil to North Korea last month only makes thing worse. Despite China’s pledge to contain North Korea’s nuclear ambitions since the 1990s, Pyongyang is making surprising breakthroughs in its nuclear and missile capability. The geopolitical argument that we will lose China’s help in putting North Korea in check if we offend China on economic issues is now irrelevant.

China’s increasingly aggressive attempt to influence foreign opinions through coercion and raw monetary power in recent years only makes matters worse. The exposure of Chinese infiltration into high political circles in Australia and New Zealand, China’s putative financial retaliation against institutions of higher education that don’t toe the line of the Chinese authorities (such as not inviting the Dalai Lama to speak on campus), and Beijing’s request of major academic journals and publishers to censor their websites, wiping them clean of scholarly works deemed subversive or sensitive by Beijing, all add up to stifle public sympathy for China.

As such, the three forces that have been restraining the U.S. from entering into conflict with China—business interests, geopolitical considerations, and public opinion—are all receding, if not working in the opposite direction. This changing context of U.S.-China relations is making escalation of a U.S.-China conflict, most likely over trade, quite plausible in 2018, regardless of Trump’s own feelings about China.

The U.S.-China relationship will face turbulence in 2018. China, whose power has been rising for the past 40 years, had been using slogans such as tao guang yang hui (to hide ambitions and disguise claws) and heping jueqi (peaceful rise) to avoid the appearance of challenging the United States. Xi Jinping is the first Chinese leader since Deng Xiaoping to modify the strategy. The new version of China’s foreign policy under Xi’s “new era” (xin shidai) is fen fa you wei (striving for achievement).

The long-standing strategic position of the United States in East Asia is expected to face a major challenge in 2018. China will continue to move toward a long-term goal of becoming a regional hegemon by replacing the U.S. The U.S., however, is unlikely to be able to respond adequately to China’s challenge due to President Donald Trump’s contradictions in his East Asia policy, his faltering domestic political support and his incompatibility with America’s allies, not to mention his mistrust of the U.S. government’s primary diplomatic agency, the State Department.

The Trump administration just released its National Security Strategy. It called China a “revisionist” country, a “rival” state, a strategic “competitor.” This reflects the belated realization on the part of the U.S. in squaring with China’s meteoric rise that is now seen as undermining the U.S.-led global order. It is also, frankly, an acknowledgement of U.S. misjudgment of China. For the past 40 years, the U.S. government had dealt with China with an assumption that increasing trade would lead to more openness in China, the gradual relaxation of the Chinese Communist Party’s control over China’s economy and the development of democracy in China. That did not happen. Republican lawmaker Dana Rohrabacher recalled this strategy and said the U.S. policy toward China was “stupid.” He characterized America's strategic misperception of China by saying: “We created a monster.”

However, an important question is whether Trump has the will to implement what he says in the NSS and whether the U.S. government has the resources to counter China.

Xi isn’t likely to sit around either. China’s foreign policy in 2018 is set to become more assertive, confident and even messianic. In his three-hour, 23-minute speech at the recent party congress, Xi preached to the Communist Party deputies to “strive with endless energy toward national rejuvenation.” The state-run Global Times newspaper said China will seek “global sway” in 2018, citing foreign minister Wang Yi. There is an increasing mass psyche in China that a conflict with the U.S. is a “growing pain” and is unavoidable in the course of its emergence as a great nation.

In 2018, Northeast Asia is likely to become a battleground for influence and hegemony between an America that wants to be “great again” and a China that wants “great rejuvenation” of its power. History will remember 2018 as the year when the U.S.-China rivalry entered a “structural” competition stage. That means this feature is “here to stay” for a foreseeable future.