Donald Trump and China–Trade War?

Donald Trump and China–Trade War?

By The Economist

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FOR decades, American grand strategy has been built on three pillars: open trade and the prosperity that flows from it; strong formal and informal alliances, from Japan to Australia to Singapore; and the promotion of democratic values. It is not clear that Donald Trump, America’s president-elect, cares for any of them. His victory represents a huge blow to American power and prestige in Asia.

Start with trade. For years the Obama administration has promoted the 12-country Trans-Pacific Partnership (TPP) as a gold-standard trade deal. It was never an easy sell domestically, but its proponents held out a faint hope that it could pass in the lame-duck Congress. That now appears unlikely: lawmakers are sensitive to the national mood, and whatever Trump voters voted for, it wasn’t for trade deals with Asia.

Indeed, Mr Trump threatens to start a trade war with China, America’s biggest trade partner, promising to slap punitive tariffs of 45% on Chinese goods. Though America would probably be the biggest victim of such a war, it would also ripple through production networks that span Asia, killing jobs and knocking confidence.

The only economist among Mr Trump’s economic advisors (the rest are businessmen) is Peter Navarro, who argues that China is responsible for hollowing out American manufacturing. He sees trade imbalances as the world’s primary economic problem, and says they are mainly caused by currency manipulation. China, he says, is a “poster child for this problem”. These views are well outside the mainstream but Mr Navarro may well carry considerable weight in the administration-in-waiting.

Mr Trump says he will pull America out of the Paris climate treaty and abrogate Barack Obama’s climate agreement with China—one of the few bright spots in Sino-American relations. He promises to label China a currency manipulator, but the only consequence of that would be that America would have to engage China in talks on the currency’s value, which would have no practical effect. He threatens to bring trade cases against it both at home and at the World Trade Organisation; and to “use every lawful presidential power to remedy trade disputes if China does not stop its illegal activities”. American law allows the president to impose tariffs unilaterally—but only up to 15% and only for 150 days.

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Barack Obama’s “pivot to Asia”—a promise to pay more attention to the world’s largest and most buoyant continent—is under threat. America’s priorities ought now to be to reassure Asian friends of America’s continued commitment; to engage China on global issues, such as climate change, as well as bilateral ones; to stitch together groupings of like-minded countries that can push back against Chinese assertiveness; and to be ready to apply greater pressure on China—by punishing Chinese firms and banks doing business with North Korea—if China does not do more by itself to rein in its delinquent client state, which is developing long-range nuclear missiles faster than outside experts feared. Hillary Clinton understood these challenges. Expecting victory, she was readying a competent team of Asia specialists.

Mr Trump, by contrast, gives no sign of understanding what is at stake. It is not clear who will agree to serve as his specialists—nearly the entire Republican cohort of Asia hands has disowned him. His election will deeply unnerve Japan, America’s staunchest friend in Asia. During the campaign he accused Japan of free-riding on America’s security commitment, and suggested that it and South Korea should develop their own nuclear weapons rather than shelter under the American umbrella—a recipe for regional instability. Neither country is anywhere close to considering the possibility. But the fear will grow of American disengagement from the region. Mr Trump’s disavowal of an American-backed rules-based order risks pushing China towards greater assertiveness—particularly in the South China Sea, if America decides to abandon its freedom-of-navigation patrols.

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China’s hawks see a geopolitical opportunity. Deep in the belief system of China’s ruling Communist party is that China is a rising power and America a declining one. Mr Trump’s election is already being seen as a cause and a consequence of American weakness. “The US and West may have to suffer from its consequences rather than China,” wrote Global Times, a newspaper with links to the military. “We may as well let the guy go up and see what chaos he can create.”


5 thoughts on “Donald Trump and China–Trade War?

  1. 1. Can Trump be a powerful president?
    “A Trump-led US is anticipated to embrace isolationism and shrink its international influence. The president-elect wants to shake off more international responsibilities and focus on domestic affairs. But due to the opposition, the shift might not be so prominent that it can make a big difference.

    But it can be expected that the US will halt projecting more strategic capabilities around the world. Besides Trump’s own tendencies, the US is not powerful enough to maintain its global hegemony. President Barack Obama is barely able to prop up the current situation, but Trump will make it go down.

    It is unlikely that China and the US will engage in more conflicts. Trump is not interested in upping the ante by launching more challenges against China because of his inclination toward domestic affairs.

    But still, it is possible that in the initial stage of Trump’s presidency, he might bash China to establish authority as a new commander-in-chief. Beijing should be prepared for Trump’s blows.

    Generally speaking, Trump is unable to show real toughness. He lacks sufficient financial support and true allegiance and solidarity from the elite. Too many distractions and a highly divided nation will make Trump reluctant to raise antagonism with China. Without unity inside, a major power won’t be determined to make troubles outside. If Trump tries to sound China out by provoking tensions, China should respond decisively and fearlessly, setting the tone for interaction with Washington”

    See more …

    2. China strong enough to cope with Trump victory, see more

    3. China would likely take countermeasures against Trump’s hard-line trade policy :

  2. History has taught me not to believe in any of the American China-bashing campaign rhetoric. The economies of both countries are so intertwined that any trade war would hurt both countries devastatingly. With the instincts of a businessman, I believe Trump will broaden economic cooperation with China. Unlike Obama who puts politics above economics, I expect Trump will join the Beijing-led AIIB and responds much warmer to China’s OBOR infrastructure projects.

    When Trump criticized China for taking away American jobs, he knows very well those jobs are no longer in China. They have left China for cheaper labor and cost. When he accused China for manipulating its currency, he knows very well that the IMF has confirmed Chinese currency is not undervalued. He may be crazy but not stupid.

    I think Trump wants the Chinese domestic market to be opened for American investment banks. Currently, such financial institutions can operate in China but there are restrictions for certain operations. They also have to create a joint company with a Chinese partner, thus working on behalf of a Chinese company according to the local market rules. This situation will be changed. Beijing has already sent signals to Trump’s team it is working on lifting restriction for direct involvement of American investment banks in the Chinese market. This would allow for improving risk management and making the Chinese market more transparent for American companies.

    China and the US will never become the best of friends unless, like Japan, China is willing to submit itself as the American’s subordinate. China is adamant not to submit itself subordinate and seek for equal partnership, but the US refuses to look at China as equal. They will always be “frenemy”, not friend not enemy. Rivalry will go on and their relations will not get any better or worse, until the US sees China as equal or that the US truly declined.

  3. Wow Rightways, I am impressed by your writing, very articulate and very well thought out. Moving in the right direction. Like to hear more.
    One question, why you don’t ‘fancy’ Trump?

  4. rightways: In as much I dislike Trump as I dislike Hillary, he won the election, fair and square, and he will have to decide what he wants his legacy to be. I do firmly believe his will be a one term presidency,

    The US of A does not belong to Trump, it belongs to the American people and the American people elected him President. Therefore, I do take him as the President of the USA. But that does not mean I have to be totally agreeing with him in whatever he does, not exercising my citizen rights to fight him when he is doing wrong. Blind obedience is not the American way. Or else there would not be votes against the establishment in this election.

    Love him or hate him, like him or despise him, he is the President of the USA, elected fair and square according to the democratic rules of the country by We the People. By the way, I did not vote for him.

    In a democratic election we do not always get the result we want. So much talks of gloom and doom about this election. USA is a matured democracy. We know the game and life moves on to the next election.

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