Is Mercantilism, Not Strategy, Driving Donald Trump’s China Policy?

While the US president-elect’s call to the Taiwanese president proves that he wants to rock the boat, it is unclear what the US wants to (and can) gain from this.

A worker checks a mask of Donald Trump at Jinhua Partytime Latex Art and Crafts Factory in Jinhua, Zhejiang Province, China, May 25, 2016. Credit: Reuters

A worker checks a mask of Donald Trump at Jinhua Partytime Latex Art and Crafts Factory in Jinhua, Zhejiang Province, China, May 25, 2016. Credit: Reuters

US president-elect Donald Trump’s attitude towards China and Russia present a curious contrast. China has been a target of criticism throughout his campaign and after he won the elections. But he has been (unusually, for a self-conceived ‘strong man’) pretty soft with respect to Russia’s aggressive moves towards its neighbours like Ukraine, who look to the US for support. Interestingly, the previous Republican presidential nominee Mitt Romney referred to Russia (rather than China) as the “number one geopolitical foe” in 2012. In 2016, the Republican president-elect has barely uttered one word against Russia. Carly Fiorina, being considered for the post of director of national intelligence, has called China the US’s “most important adversary”. Thus managing relations with China is likely to be a challenging issue for the Trump administration.

Lack of strategic vision

There seems to be no strategic vision guiding Trump’s announcements on China except a mercantilist desire to strike a better deal. China is definitely likely to be a stronger long-term threat to American interests and Russia is, as the current President Barack Obama once accurately put it, “a regional player”. But Trump’s pronouncements do not explain the nature of US interests at stake in Taiwan, neither do they suggest a plausible plan to reach a particular goal. Trump has criticised China for its trade policy, particularly focusing on the latter’s devaluation (though most economists think that critique is outdated and possibly counterproductive). The criticism seems to be more influenced by the political compulsion to blame someone rather than an accurate understanding of the costs and benefits of trade agreements.

After winning the elections, Trump spoke with Taiwanese President Tsai Ing-wen, the first publicly known contact between a US president or president-elect and a Taiwanese president since 1979, when the US formally established diplomatic relations with Communist China (People’s Republic of China). While the US has a strong interest in seeing that China is not the dominant power in the East Asian region and hence wants to support other countries balance a rising China, supporting Taiwan by questioning the “one China” policy is, at best, a questionable move.

It is not just that Chinese leaders do not like to be seen succumbing to American pressure. Taiwan is incredibly important to China. Taiwan is geographically and politically very close to China and the latter is unlikely to give up on the “one China” policy. For China, Taiwan is part of the unfinished project of nationalist state-building and the fight against imperialism (American intervention), all rolled into one. Taiwan is populated with ethnic Chinese and China’s nationalist story has usually included Taiwan as part of “one China”. Further, allowing the ‘enemy’ to have a strong presence in an area so close to its mainland is similar to the Soviet Union placing nuclear missiles in Cuba.

A delicate balance

Some lessons from history are worth remembering. In 1950, an impoverished, ravaged by civil war China took on the nuclear-armed US because it did not want American troops at its borders (with Korea). At that time, American policy makers made the mistake of assuming that China’s warnings to intervene on behalf of North Korea were a bluff. Why would a poor country devastated by internal strife take on the might of a nuclear-armed US? The result of that obstinate belief was the continuation of the Korean War for two years even after China’s entry and a stalemate at the end. The war took the lives of at least 33,000 US soldiers, most of whom died after China entered the fighting.

China is in a much stronger position today. While its military is still inferior to that of the US in aggregate strength and the latter also has more allies in the region, Taiwan is singularly important to China (even more than Korea). China will risk anything – even a war with the US – if Taiwan seeks independence. In the 1950s, the Dwight Eisenhower administration had to issue explicit nuclear threats to stop China’s efforts to regain Taiwan and since then a delicate status quo has remained in the region wherein Taiwan has de facto independence but is not recognised as a sovereign state by China (and many other countries). During the 1970s, the US under the Richard Nixon administration used the Sino-Soviet split to turn China against the Soviet Union and dropped Taiwan like a hot potato. It began to follow the “one China” policy while committing support to Taiwan through a domestic law (Taiwanese Foreign Relations Act), which does not include a commitment to militarily intervene in case of an attack by China (though, in practice, many expect the US will do so anyway).

Trump is seeking to disturb this delicate balance. However, Taiwan is an odd issue chosen to pick a bone with China. Taiwan is geographically very close to China and it would be difficult and costly for the US to defend the country in case of an attack from the latter. Taiwan itself has a reasonably strong military and can make war expensive for China, though the latter is likely to emerge victorious in the end. Thus, a war in Taiwan Straits between the three countries would impose serious costs on all parties, particularly on Taiwan, and is likely to end with China gaining more.

This strategic reality has made the US reluctant to explicitly support Taiwan in its games against China. For the US, the current strategic situation is, on balance, preferable – its ally (Taiwan) is de facto independent but antagonist China has not been provoked by claims of de jure independence. Disturbing this delicate strategic balance should provide some benefits. Trump’s choice of Taiwan to needle China is both brilliant and foolish at the same time. If China cares about one issue substantially more than other matters, it is Taiwan. Any move to adversely affect the status quo on Taiwan’s status is likely to garner China’s attention. If Trump’s goal is to use Taiwan to force China’s concessions on issues he really cares about – like trade – he has achieved the first step of gaining China’s attention. However, it is also unlikely to succeed because Taiwan is one issue where China is absolutely unwilling even to negotiate, much less concede. China does not want to lay a precedence of talking about Taiwan’s status since it would only increase the latter’s belligerence, particularly if backed by the US.

Peace between great powers is usually maintained by acknowledging each other’s sphere of influence. In fact, that is Trump’s approach towards Russia. Trump is conciliatory towards Russia on Ukraine (and other issues). While one can argue that Taiwan is more important for the US than Ukraine (because historically the US has committed to Taiwan and it is also important to maintaining the balance of power in East Asia), it is nevertheless risky to pick a fight on a matter that is more important for the opponent than oneself. The US cares less about Taiwan than China does and hence the latter will be willing to go to greater lengths to defend its position. As a Chinese general is believed to have said during the 1996 Taiwan Straits crisis, American leaders “care more about Los Angeles than they do about Taiwan.”

On the one hand, China’s greater stakes in Taiwan may give more leverage to the US to demand concessions from China on other issues, like trade. This seems to be Trump’s ultimate goal. However, such an approach is fraught with many difficulties. For one, China does not want to appear to be discussing Taiwan’s status. More importantly, Trump may have greater leverage if Taiwan was the only issue in bilateral relations. However, China can increase costs for the US on many other fronts, starting with North Korea. Until now, while China is reluctant to put pressure on North Korea beyond a point, it has not supported the North Korean nuclear programme. Most analysts think China prefers a nuclear-free but independent North Korea (as a buffer). If China changes its policy and helps North Korea in its nuclear programme (remember China is only the country that has helped another state – Pakistan – develop an independent nuclear weapon capability), the North Korean nuclear stockpile can grow in leaps and bounds. This would be a great cause for worry for US allies like Japan and South Korea.

While candidate Trump seemed to support Japan and South Korea developing nuclear weapons, President-elect Trump has already turned around on the issue. On issues like keeping up pressure on Iran, stabilising Afghanistan and fighting terrorism, the US needs China’s support. China cares much less about these issues than the US does, meaning it has more bargaining powers. Implementing the Paris climate agreement and pushing anything through the UN can get complicated if China opposes it and uses its veto power (though Trump does not seem to care much about either of these problems).

Unclear motives

Further, it is not clear what Trump wants from China. If his concern is the devaluation of China’s currency, it is a red herring. Most economists think this is an outdated worry (and in fact, China has been trying to stop currency from falling further and trying to build up domestic demand). The trade deficit cannot be easily bridged without changing consumption habits in the US (or waiting until China’s labour wages catch up with the rest of the world). Trump may be in for just a rhetorically sweet agreement (like the Carrier deal, which saved about 800 jobs out of 2,100 at risk but gave him enormous political mileage).

It is impossible to bring back millions of “lost jobs” because most jobs are lost to technology, and those that do come back will push prices up. Stopping the import of raw materials and subsidiary parts from China may also increase domestic cost of production, making American industries uncompetitive in the world market and thus hurting American exports. A trade war with China will harm the US as well. However, leaders face more public ire in a democratic country. In this context, Trump wants a win, a seeming concession from China that he can sell to his base.

Trump’s pronouncements on Taiwan are bound to inflame tensions between the US and China. A satisfactory resolution depends not only on China’s willingness to concede but, more importantly, on the kind of demands the US will make. The nature of demands will give a clue regarding Trump’s vision of US foreign policy objectives and will be a test of the usefulness of mercantilist diplomacy in fulfilling national interests.

Vaidya Gundlupet is a research scholar focusing on international security issues.

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