US-China relations beyond 2020

US-China relations beyond 2020

Whether Donald Trump secures a trade deal or not, campaign season rhetoric suggests friction with China will continue even if he fails to win re-election

In the world's preeminent superpower, the race to elect the new president is starting to yield clues about the future of its foreign policy. The narrowing gap between China and the United States in both economic and military potential has made China's rising power a regular fixture in US political discussions.

US President Donald Trump has made his tough stance toward China a cornerstone of his appeal to his base as he campaigns for a second term. Some of his prominent Democratic Party challengers have signalled that they do not entirely disagree with his approach.

In the meantime, American foreign policy toward China has significant implications for Asia Pacific.

Mr Trump faces daunting odds to win re-election in 2020. Despite a booming economy, he suffers from consistently low approval ratings. His base, while extremely loyal, appears finite and he has been unable to build on it.

One factor that could help Mr Trump's electoral chances is the trade war between the US and China. The president last year imposed tariffs on Chinese goods after repeatedly accusing the country of "ripping off" the US with unfair trade practices.

Trade negotiations have yielded few results so far, and last week Mr Trump upped the ante again after fresh talks in Shanghai got off to a bad start. Starting on Sept 1, he said, Washington will impose a 10% tariff on another US$300 billion worth of Chinese imports. The rate could rise to 25%, he said, if Beijing does not come up with a better offer to resolve the standoff.

Economists have warned that the tariffs will do much more harm to American businesses and consumers than they will to China, despite Mr Trump's claims to the contrary.

BIG WIN NEEDED

Opinion among experts is split on whether Mr Trump will try to conclude a trade deal with China before the 2020 election. Some believe that given the promises he made in 2016, he needs to secure a visible "win" on Chinese trade. Others suggest that his tough talk will continue to win him fans at home.

Richard McGregor, the former Beijing bureau chief for The Financial Times and the award-winning author of The Party, told Asia Focus that the trade war is "a long-term contest with no quick fixes".

"It is possible that there will be some kind of deal, but it will be nothing other than a way station to the next conflict," he said.

“China is pursuing a mercantilist strategy at home that disadvantages US and European companies while tipping the scales toward Chinese firms and state-owned enterprises,” says TJ Pempel, a professor of political science at the University of California, Berkeley.

"Beijing seems to recognise that whatever deal is agreed to with Mr Trump, it will be thrown out a few weeks later. And the closer we get to the election, the more likely that Mr Trump will throw out any deal."

Regardless, the trade war will be important for Mr Trump's re-election for several reasons, TJ Pempel, a professor of political science at the University of California, Berkeley, told Asia Focus.

"If Mr Trump 'wins' and gets a deal (a good one or a bad one), he will dominate the news on this fact and likely gain support," he said, adding that it could affect Wall Street stock prices, a point of pride with the president.

"At the same time, the tariffs are hurting a lot of his strong constituents, especially farmers who seem patient to date but who may lose patience if a deal is not done or is delayed."

Indeed, the trade war has not impressed everyone. Amy Li, a student of Taiwanese origin living in America, said that she feels Mr Trump's policies toward China have been "shortsighted".

Because of the trade war, she said, "not only have costs gone up for more white-collar industries like technology, but the hostility toward China will also lead to less high skilled immigrants being interested in coming to the US." She said she does not think these policies are "fair to the American people".

Kai Zhao, an American-Chinese Silicon Valley startup entrepreneur, said: "While I believe that the Mr Trump policies toward China are fuelled by the right ideology and that it's about time for the US to stop being so passive in protecting its economy, the strategy has been poorly executed."

He said he was concerned about how Mr Trump's policies will affect business. "Many American businesses rely on Chinese consumers to thrive. Mr Trump's trade war has woken up economic nationalism inside China, and shifted them toward their own national brands."

Should businesses suffer as a result of the trade war, Mr Trump's already narrow path to the White House may be further imperilled.

REGIONAL IMPLICATIONS

Mr Trump's competition with China runs beyond domestic economic dimensions, and has implications for Southeast Asia in particular.

Pete Buttigieg, a Democratic presidential candidate, has emphasised the ideological challenge that China poses to the US. In a foreign policy speech, he said: "China presents perhaps the most pressing example anywhere of the need to stand for American values amid the rise of a potent alternative."

This competition has played out clearly in Southeast Asia. Enze Han, an associate professor of political science at the University of Hong Kong, told Asia Focus that China's challenge "centres more in its economic influence, which surpasses the Americans, although the US still enjoys more military clout in the region".

"In terms of ideology, China's model indicates that one does not have to be democratic to have economic development. This suits several of the authoritarian governments in the region, such as the one in Thailand," he said.

One concrete manifestation of these policies has been the Belt and Road Initiative, under which China has invested heavily in infrastructure in developing countries. Unlike many of the programmes supported by Western institutions, requirements for good governance or democratic development are not attached.

Prof Han said the US under Mr Trump has "taken a more confrontational approach toward China in the region of Southeast Asia, not only openly challenging China's claims in Southeast Asia but also directly forcing some of the Southeast Asian states to pick sides against China".

In response, countries in the region have taken divergent strategies in reacting to this superpower competition. Vietnam, he said, has openly sided with the US due to territorial disputes with China, "while others such as Cambodia and Laos are more closely aligned with China".

"It is interesting to also see the increasing cooperation between Thailand and China on multiple fronts," he said.

US Secretary of State Mike Pompeo, speaking last Thursday at an Asean meeting in Bangkok, insisted that the United States never asked Indo-Pacific nations to "take sides".

The trade war is also a domestic political issue in China. President Xi, unencumbered by term limits, is nonetheless seen by some analysts as potentially vulnerable, as his wide-ranging anti-corruption campaign has made powerful enemies who would be ready to pounce on his missteps.

"My view is that Mr Trump's unpredictable tactics hurt initially," Mr McGregor said. "Inside the system Xi was blamed on many fronts for messing up China's most important bilateral relationship by his assertive behaviour.

"Now, I think we have a rally-round-the-flag mood in China. Mr Trump's tactics have lost him much sympathy in China."

Should the economy falter, however, sentiment inside the Communist Party could turn against Mr Xi again, he pointed out.

There may also be ramifications for the Party as a whole. He Weifang, a Peking University law professor, has encouraged China to use the trade war as an opportunity for necessary change.

Without structural economic reform, "China cannot sustain its economic growth and the economic downturn will fundamentally shake the legitimacy of the Communist Party's regime", he told the South China Morning Post.

He added that the economy is central for the Party's stability. "The government has been prioritising ideological control rather than economic development, which doesn't and won't work."

DEMOCRATS TALK TOUGH

The American outlook on China may remain similar to Mr Trump's even if there is a change in the Oval Office in 2020, as there is bipartisan agreement on the China challenge.

During the first debate of the Democratic Party primary season, four candidates identified China as the number one national security threat to the US. Two major contenders, senators Bernie Sanders and Elizabeth Warren, have also indicated that they agree with the general outlines of Mr Trump's China policy.

In April, Mr Sanders called on his opponents to pledge to label China a currency manipulator. Last year, his Senate office also released a statement saying that Sanders "strongly supports imposing stiff penalties" on countries such as China "to prevent them from illegally dumping steel and aluminium into the US".

Ms Warren, similarly, told CNN in May: "I have to say, when President Trump says he's putting tariffs on the table, I think tariffs are one part of reworking our trade policy overall."

In contrast, former vice-president Joe Biden initially dismissed fears about China, although he later backtracked. "China is going to eat our lunch? Come on, man! … They're not competition for us," the Democrat frontrunner said.

Mr Biden may be out of step with the rest of his party, however. Mr McGregor said, "I suspect Biden regrets that statement and I doubt you will hear such sentiments from him again."

"The idea of China as a threat, on multiple fronts -- geopolitically and economically, and on trade, technology and ideology -- holds sway in Washington, on both sides of the aisle."

Prof Pempel cautioned against too much alarm about worrying too much about technology, as China is "still a long way from being competitive" in areas such as artificial intelligence and electric cars.

However, that does not mean that China is not a threat to the US. "China is still a major US rival economically and is pursuing a mercantilist strategy at home that disadvantages US and European companies while tipping the scales toward Chinese firms and state-owned enterprises," Prof Pempel pointed out.

"There is every incentive to push back."

As such, observers hoping for radical changes in China policy in the event of a Democratic takeover of the White House may find themselves disappointed.

WAY FORWARD

Mr McGregor discussed some options that the Chinese government could take to improve bilateral relations, but was pessimistic about how Mr Trump would receive those overtures.

"Beijing could make large concessions, on state subsidies for high-tech and government companies, but Chinese leaders have made clear that is off the table," he said. "Mr Trump could be marginally assuaged by some really valuable one-off purchases of farm goods and energy, but the impact would not last long."

A key problem, he noted, was Mr Trump's personality. "Mr Trump gets bored quickly, and doesn't reciprocate favours anyway," he said. The atmosphere of the election year could also worsen relations, he noted, especially with both rhetoric and actual policy worsening.

What should the US, on the other hand, do moving forward regarding its relationship with China?

Human rights was something Mr Zhao hoped the next president would focus on, including China's record in Xinjiang. Several Democratic candidates pledged to sanction people running Uighur internment camps and put companies that built those camps on the Commerce Department's Entity List.

Ms Li said she hopes the US would "restart relations with other countries in the region, perhaps through something like the Trans-Pacific Partnership". Mr Trump abandoned the TPP shortly after becoming president in 2017.

"It would have been good if the US joined forces with the other countries that share US concerns, in Europe, Japan and South Korea," Prof Pempel said. "But Mr Trump is taking a mistaken unilateral approach that will be less effective in forcing changes in China."

In the long term, Prof Pempel said that the US needs to play to traditional American strengths in being "better than China in a variety of high tech sectors".

This would, however, require "a fundamental change from the 'Make America Great Again' platform and the focus on the coal industry, tariff protectionism, a denial of climate science and attacks on expertise in all fields".

"In short, it needs to be looking to keep America great for the future, not pretending that we can go back to the 1950s," he said.


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