American relations with China, a centerpiece of President
Trump’s foreign policy, are unraveling. Trump’s China policy has been erratic,
inconsistent, and working towards cross-purposes at various times. After three
years, the effect of Mr. Trump’s foreign policy seems to be coming home to
roost as China gears up to quell democratic protests in Hong Kong while simultaneously
nearing endgame in the trade war against the United States.
Even though China figured prominently as a foil in Donald
Trump’s 2016 presidential campaign, the new president initially reached out to
the Chinese government for help in dealing
with North Korea’s Kim Jong Un, even as China and the US began trade talks.
Chinese President Xi Jinping was reluctant to help Trump rein in the Chinese
client state. This may be partly because the Chinese see Trump’s overtures to
Kim as an attempt
to take North Korea out of China’s sphere of influence.
In 2018, as the US and North Korea were experiencing a détente,
Trump was beginning the tariff war against China and myriad of other nations.
The trade
war began with US tariffs on washing machines and solar panels in March and
ramped up in April with tariffs on steel and aluminum imports. The first rounds
of tariffs did not single out China, but the Chinese government responded with
25 percent tariffs on 128 US goods. Trump fired back with a 25 percent tariff
on $50 billion of Chinese imports. The cycle has continued throughout the 16
months since.
Fast forward to August 2019 when pro-democracy activists began
protesting Chinese rule in Hong Kong. As the protesters waved American flags
and sang the “Star-Spangled Banner,” the Trump Administration seemed to be in
disarray. Many members of a party that is making the argument against American socialism
a central theme of the 2020 election seemed reluctant to criticize the communist
Chinese government’s actions. Commerce Secretary Wilbur Ross called the Hong
Kong situation an “internal
matter,” while National Security Advisor John Bolton took the opposite tack
and warned China that a crackdown similar to the 1989 Tiananmen Square massacre
would be a “big
mistake.”
For his part, the president, who had spent the last two
years criticizing China, was unusually subdued when he spoke to reporters on
Tuesday, saying, “The Hong Kong thing is a very tough situation, very tough.
We'll what see what happens. But I'm sure it'll work out. I hope it works out
for everybody, including China, by the way.”
Politico
reported on Wednesday that President Trump agreed not to press President XI on
human rights abuses prior to the G-20 summit in June. Per three people who were
familiar with the telephone conversation between the two leaders, Mr. Trump did
not extract a promise from China for his concession.
Since news of the conversation became public, President
Trump cautiously broached the subject of Hong Kong in a tweet that first complimented
President Xi and then said that Trump believed that “if President Xi wants to
quickly and humanely solve the Hong Kong problem, he can do it.” Trump also
offered Xi a “personal meeting.”
The bottom line is that even though many of President Trump’s
supporters maintain that he is playing 4-D chess, it is more and more apparent that
he has been outfoxed by both President Xi and Kim Jong Un at every turn. First,
Kim won a diplomatic coup in having the president of the United States come to
him without making any concessions. Now, Xi seems to have planned ahead to
silence Trump as China handled Hong Kong while simultaneously destroying Trump’s
chances for re-election.
China’s
response to Trump’s latest tariff threat was to allow its currency to be devalued
and shutting off Chinese purchases of American agricultural products. The cheaper
yuan will make Chinese exports more attractive to other trading partners while shifting
Chinese agricultural purchases to Russia will deprive American farmers of one of
their largest export markets. The economic attack on American farmers is
especially problematic for President Trump since rural white voters are a vital
part of his base. Trump’s farm
bailouts have already cost more than the combined revenues from his
tariffs.
As the US economy teeters on the brink of recession thanks
to the trade war and Trump faces increasing pressure to show progress due to
the looming elections, China has more weapons ready to fire in the tariff tiff.
Last May, the Chinese
warned that they would use rare earths as an economic weapon against the
United States if the trade war persisted. China controls about 90 percent of the
world’s supply of these metals, which are used in the manufacture of electronics
from games to smart weapons. If China cuts off the supply of rare earths to the
US, the effect on the tech industry would be devastating.
Another weapon that the Chinese might deploy against the US
is our own debt. With more than $1
trillion in Treasury notes, bills, and bonds, China is the largest foreign
holder of US debt. China could call in this debt and cause the value of the
dollar to crash. This is likely a doomsday scenario since the accompanying world
financial crash would also be devastating to China.
On the other hand, Trump is running short of leverage to use
against the Chinese. Typically, the US would respond to a problem like China’s
actions in Hong Kong with economic sanctions, but American trade with China has
been hard hit by the trade war. As trade between the two countries declined, so
has America’s ability to influence the Chinese government. With heavy taxes on
most Chinese goods, there are few arrows left in President Trump’s quiver.
There appear to be few ways out for Donald Trump. His
choices are to stay the course and risk a recession or back down and risk his
image. Even though the trade war is hurting also China, as
I’ve pointed out before, China doesn’t have to outlast the American
economy, they just have to outlast Donald Trump.
President Trump is in a very tight spot. If he persists in
the trade war then it is almost certain that China will continue to ratchet up
the reprisals on the American economy. More and more economists see the likelihood
of a recession before the election, which would be devastating to Trump’s chances
of re-election. Yesterday’s stock market sell-off was based on recession fears.
Likewise, if the Chinese decide to crack down on Hong Kong’s
democracy demonstrators, people who are appealing directly to the United States,
Trump would have very few tools to influence the Chinese government on behalf
of the protesters. As a result, the US would lose face around the world while
China flexed its muscles.
In either case, Trump would look bad at home. His strongest
area has been the economy so, if the US enters a downturn, the president loses
his best argument for re-election. Further, Trump’s base has long relished his
reputation as a fighter. If he is seen as ineffective against a brutal Chinese
action against Hong Kong, his tough-guy image could shatter and cost him support.
Trump’s current situation is almost unwinnable and the president
has no one to blame but himself.
Originally published on The
Resurgent
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