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Foreign Policy

Trump’s Strategy Against China Invites High Risks

Sep 03, 2019
  • Wu Zurong

    Research Fellow, China Foundation for Int'l Studies

U.S. President Donald Trump’s extreme pressure strategy against China is showing signs of defeat in the first series of battles. His strategy is causing damage and raising serious risks for the United States and China as well as other countries of the world.

First, the U.S. image has been tarnished and its credibility seriously damaged in China and other parts of the world. In early autumn of 2017, Trump was given a red-carpet welcome in Beijing with a rich agenda of plans to move bilateral cooperation forward. However, to the surprise of much of the Chinese population, in fewer than five months Trump launched a trade war against China. Then in May of 2019 as the two countries were about to hold the 11th round of economic and trade negotiations, Trump unilaterally decided to increase tariffs from 10% to 25% on $200 billion worth of Chinese goods. Trump’s measure escalated the trade war and violated the consensus reached by the two countries to tackle trade disputes through consultation.

Soon after the conclusion of the 12th round of high-level economic and trade consultations on July 30-31 in Shanghai, Trump again arbitrarily decided to add 10 percent tariffs on another $300 billion worth of China-made products, to take effect on September 1, 2019. This decision came just after the two sides had agreed that the 12th round of consultations would be conducted on the basis of equality and mutual respect, and that the United States would not impose new tariffs. Trump’s action further contradicted public statements by both sides that the Shanghai consultations were constructive and that working teams would continue discussions in August in order to make adequate preparations for the next round of high-level negotiations in September in Washington, D.C.

Repeated instances of Trump’s behavior directly contradicting his statements have seriously damaged his credibility in China. His poor credibility has contributed to a weakening in the effectiveness of U.S. diplomacy with China and other countries on the world stage. It is a serious betrayal of Trump’s promise that the United States “will seek friendship and good will with the nations of the world” made in his inaugural address on January 20, 2017. In the same address, he stated that “we are transferring power from Washington, D.C. and giving it back to you, the American people.” When 96 percent of American consumers and business people called on him not to impose tariffs on the $300 billion worth of China-made products, he refused to give decision-making power to the American people.

Second, by groundlessly labeling China a currency manipulator Trump has hurt himself and the United States instead of discrediting China. His decision has not only deviated from the established practice of the U.S. Treasury Department, but also finds little approval or support in the U.S. and other parts of the world. The International Monetary Fund (IMF) reported in August 2019 that the exchange rate of the yuan was “broadly in line with medium-term fundamentals” and China’s central bank “has had little foreign exchange interventions in recent years.” The IMF also welcomed China’s efforts to reform its exchange rate regime to make the yuan more flexible.

Most financial experts believe Trump’s decision lacks professional evidence and that it is politically motivated. Trump aims to weaken the U.S. dollar to boost the American economy. For the sake of creating pretext to abandon the strong-dollar policy, Trump complained in a tweet on July 3, 2019 that China and Europe are playing a “big currency manipulation game,” indicating that the U.S. should not “sit back and politely watch.” In order to gain advantage for the dollar, Trump has not only repeatedly exerted political pressure on the Federal Reserve to raise the interest rate, but also attempted to launch a global currency war. The world is now worried that the U.S. labeling of China as a currency manipulator may signal an impending currency war. Trump’s trade and monetary policies have already caused huge market upheavals and carry significant global economic and financial risks.

Third, deployment of intermediate range missiles in Asia to target China has proven unpopular. It is now clear that U.S. withdrawal from the Intermediate Range Nuclear Forces (INF) Treaty had been carefully planned with both strategic and tactical intentions. In little more than two weeks’ time after the withdrawal became effective on August 2, the United States carried out a flight test of a conventional ground-launched cruise missile off of its western coast. As such tests would have been previously barred under the now-defunct INF Treaty, this first test reveals its urgency and premeditation. Even more meaningful is the intended deployment of intermediate range missiles in Asia referred to by new Defense Secretary Mark Esper during his first visit to Asia. Esper said in Sydney on August 2 that he “would prefer months” for placing ground-launched intermediate range missiles in Asia. But after his visit to Australia, New Zealand, Japan, the Republic of Korea and Mongolia, it seemed that Esper had understood that more “consultations” would be needed before the missiles’ deployment.

Fourth, arms sales to Taiwan have encountered unprecedented opposition and retaliation. Soon after the Trump administration’s announcement of the sale of $2.2 billion worth of Abrams tanks and portable Stinger anti-aircraft missiles to Taiwan last month, it announced that it would sell $8 billion worth of F-16 fighter jets to Taiwan. In just two months, the Trump administration announced more than $10 billion in arms sales to Taiwan, which accounts for roughly two-thirds of all U.S. arms sales to Taiwan since 2010. China has declared that the country will take all necessary measures to defend its sovereignty and national interests including by imposing sanctions on U.S. enterprises involved in the two packages of arms sales to Taiwan. The arms sales therefore not only infringe upon China’s sovereignty and may harm peace and security in the Taiwan Strait, but will also negatively affect the U.S. economy and its international business operations.

The U.S. economy is strong at the moment. Yet signs of the advent of a recession in the U.S. and the world have begun to emerge. U.S. GDP growth came down from 3.1 percent in the first quarter to 2.1 percent in the second quarter of this year. The Market Purchasing Managers Index for manufacturing dropped from 50.4 to 49.9 in August. And the 10-year Treasury bond yield fell below 1.6 percent, marking the first time since 2007 when it has fallen below the yield of the two-year Treasury bond.

Growing numbers of people agree that Trump’s aggressive China policy has hurt rather than helped the U.S. and the global economic situation. Trump should put the interests of the American people and the rest of the world above his desire to establish his legacy and place himself on par with historical presidents George Washington and Abraham Lincoln. It is a grave strategic mistake to radically change the course of 47 years of China-U.S. relations. By refusing to correct his mistake, he will be held responsible by history for the suffering caused by his misguided China policy.

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