What Does Trump Mean For China?

The trade policies President Elect Trump advocated on his unconventional Presidential campaign trail would be disastrous for China, he proposed 1930’s style tariffs on Chinese goods of up to 45 per cent if China did not cut domestic subsidies and put an end to China’s mass theft of US intellectual property. Trump went on to label China as a currency manipulator which was damaging the US economy with its actions and he even suggested that he would try and renegotiate repayments on the substantial US treasuries which are in Chinese hands, an idea no doubt gleaned from his experiences of dealing with disgruntled creditors in the real estate business. The remarks were dismissed by many as more Trumpian hyperbole as it was clear that his ideas in practice would bring about economic doom for both countries. In fact Chinese officials in Zhongnanhai who should have been concerned about Trump’s election were instead described as enjoying reactions varying between pleased and ecstatic.

It would appear that the Chinese foreign policy elite have been paying very careful attention to both the rhetoric and actions of Trump. After a year of watching him action they coolly judged that while he employs colorful language and he had to stoke the nationalist passions of his supporters to win the election, they concluded that ultimately he will moderate his stance in office, plus Congress backed by powerful commercial lobbies will restrain his anti-China moves to mere token gestures.

The Chinese government are also keenly aware that the US President does have more liberty to direct diplomacy and military matters and his world view and personality (which of course will have been analyzed by the Chinese as much as the western media) point to a future of increasing US isolationism and a world seen through a business like or transaction based lens as opposed to a world of opposing values.

This signal of US retreat represents a ladder of opportunities for Chinese power, a once in a generation chance to extend and promote its signature foreign policy initiative the Belt and Road unchecked, or perhaps to strike a grand bargain with the US over the disputed islands in the South China Sea, without US diplomatic and military power back up the regional claimants like Vietnam will be unable to meaningfully resist Chinese pressure. Success in the South China Sea would see China eyeing up reunification with Taiwan with greater confidence.

Obama’s grand geo-political move the “Asia Pivot” was recognition that the Pacific region would now be the most important, both politically and economically in the world. The Asia Pivot’s economic lynchpin is the Trans Pacific Partnership TPP (a trade pact covering around 40% of the world economy but excluding China). The TPP was already in the process of ratification by many Asian and Latin American countries, but its obituary was written within hours of Trump’s triumph thanks to his outspoken opposition on the campaign trail. The demise of the TPP opens the door for China to take the initiative with its own Pacific centered Free Trade of the Pacific agreement, while not as ambitious as the TPP it could give China the economic initiative in the world’s most dynamic region.

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It is difficult to imagine a President Trump giving a lecture to the Chinese on human rights; perhaps he would be more likely to be taking tips on suppressing opposition and controlling an ungrateful media. His approach is in strong contrast to Hillary Clinton who has form going back to her First Lady days of criticizing human rights. The Chinese will be gladdened that they will no longer have to hear lectures on Tibet, human rights or what they see as western hypocrisy.

China’s journalists were given an enormously generous gift this year in the form of the US election thanks to its candidates and the resulting media frenzy, a master class in how to provide a rich seam of propaganda for an autocratic country that wants to undermine liberal democracy.

Trump has in the past called climate change a Chinese invention and there is speculation that many in his administration will be keen to pull out of the Paris accords, therefore it may well be incumbent on to Beijing to convince Trump to keep to the agreement, this turn of events would have seemed unthinkable a few years ago when China was the climate bad guy and the West was leading the diplomatic (although less so in terms of emissions) path in forging a climate agreement.

On the face of it Trump’s Presidency is a cast iron opportunity for China to realize a dream of becoming a world power. It seems simple; as one power retreats another can take its place. However, perhaps the Chinese government should be more concerned than they are. US retreat or isolationism is not going to be straightforward or simple, it is just not possible to unravel a complex system of alliances and international agreements overnight and the results of any pullback would be chaotic and unpredictable.

For example Trump suggested that Japan and South Korea should pay for their own defense and US troops based there brought home, this might sound like a geo-political win for the Chinese, but this would soon raise the prospect of those countries entering into an arms race with China or trying to build nuclear weapons to defend themselves against North Korea, bringing further instability into the region and the prospect of war.

The Chinese might well be underestimating Trump’s determination to impose trade pain on China even if it damages the US economy may surprise the Chinese who are so used to the US being a champion of free trade.

The one thing we can predict confidently about Trump’s Presidency is its unpredictability and disregard for norms. There also remains a strong possibility he may become enraged by real or perceived slights upon US interests and use US military forces in new conflicts, or seek to contain China’s military as he views it as a threat to US dominance.

Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

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