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Trading Blows

Renowned foreign policy expert Li Cheng surveys the prospect of a trade war between the US and China and its long-term impact on bilateral relations

By NewsChina Updated May.3

Apart from a short respite during US President Donald Trump’s visit to China in November, 2018, the bilateral relationship between the world’s two largest economies has rapidly deteriorated. The US labeled China a top security threat and a “revisionist” power, and the Trump administration has announced tariff increases on an estimated US$50 billion worth of Chinese imports for 2018. China responded by issuing its own list of US products of comparable value that would be subject to increased tariffs should the US follow through with trade sanctions. With the increasing risk of a trade war between the two countries, NewsChina interviewed Li Cheng, director and senior fellow of the Washington-based John L. Thornton China Center at the Brookings Institution, on the future of the Sino-US relationship. Li, who grew up in China and moved to the US in 1985, is an expert on Chinese politics and the Sino-US relationship, and is a prolific writer. He is also a director of the National Committee on United States-China Relations. 
NewsChina: It has been more than a year since Donald Trump was sworn in. What do you think of his approach to foreign policy? Do you note any clarity or consistency, particularly toward China?  

Li Cheng: I don’t think Trump has formulated a clear and consistent foreign policy. One reason is that Trump is still under intense domestic scrutiny resulting from the investigation over his alleged collusion with Russia, and uncertainty about the result of the investigation has had a great impact on Trump’s foreign policy. Another reason is that many of the key posts within the White House, especially those relating to foreign policy, are either unstaffed or have a high turnover rate, which has had a major impact on the consistency of Trump’s policy. The inconsistency is particularly salient in Trump’s policy toward China. During his visit to China last November, Trump called Chinese President Xi Jinping a “good friend,” but now, China is being labeled America’s top strategic adversary. To a large extent, US policy toward China is now driven by individual issues on an ad hoc basis, not by a holistic long-term strategy. 
The US is used to having foreign policy masterminds such as George Kennan, A. Doak Barnett, Zbigniew Brzezinski, Henry Kissinger, Robert Zoellick and Richard Haas. However, none of the officials currently involved in making foreign policy in the Trump  
administration could be described as a master of grand strategy.  
NC: How does the Trump administration’s ‘Indo-Pacific strategy’ compare to the Obama administration’s ‘Pivot to Asia’? 

LC: The Indo-Pacific strategy is similar to the Pivot to Asia strategy in that both remain conceptual strategies that have not actually been implemented, and both lack budget support from the US Congress. 

The difference is that under the Trump administration there has been a sharp decline in US soft power. Also distinct from the Obama administration is the composition of Trump’s team. Whereas the Obama administration was mostly staffed by professional diplomats and administrative officials, many of the key posts in the Trump  
administration are staffed by business executives, retired military generals and media commentators. Officials with a military background, for example, are not necessarily more war-prone, but they do have a different leadership style and may adopt a different approach to foreign policy.  

Compounded by Trump’s unpredictable personal style and apparent infighting within the White House, these challenges have prevented Trump’s security strategy from progressing past the conceptual stage. Moreover, for any security strategy to work, there needs to be flexibility and priorities. But Trump’s strategy appears to lack a  
strategic priority. On the contrary, Trump seems to be making an enemy out of everybody, including some US allies.  
NC: Compared to President Trump’s rather amicable rhetoric towards China during his visit to Beijing last November, Washington’s attitude to China has hardened more recently. Why do you think that is? 

LC: Indeed, in the past few months there appears to have been an abrupt change in Washington’s rhetoric toward China. The national security strategy report lists China as a top security threat to the US, even ahead of Russia. There has been serious concern over China’s growing influence, referred to as China’s ‘sharp power,’ across the Western world. The reasons are complex. First, the rise of China, compared to the relative decline of the US (especially the decline of its soft power) in recent years, has created anxiety among the American elite and the public just as previous concerns over the ‘collapse of China’ have now given way to fears that China will replace the US to become the world’s leader.  

Secondly, the arrival of a Trump presidency has further exacerbated such concerns. Trump is by no means a conventional politician. The mainstream media and political establishment have resisted his rise to the presidency, as many critics consider Trump himself to be a threat to American interests. As these two fears reinforce each other, there has been a resulting surge in calls to defend Western values.  

This sentiment may be a temporary one, and may not last in the long term. After all, severing relations with China will harm American interests. I think policymakers on both sides should remain calm and rational in this difficult time. Moreover, they should refrain from hostility and extreme measures to resolve disputes between the two countries.  

NC: How do you perceive the ongoing trade war between the two countries? How will it affect the long-term prospects of the Sino-US relationship? 

LC: Neither the US nor China will benefit from a trade war. I think the recent announcement of higher tariffs on certain imports is just testing the waters. If Washington decides to fully implement the resolution of the Section 301 investigation against China, that will be the start of a real trade war. How the trade war will evolve in the long term will depend on how its fallout is felt and assessed at the corporate, state, and national levels.  

At the corporate level, many American multinational companies (MNCs) can no longer obtain the extraordinary profits in the Chinese market that they often did in the 1990s when many of China’s market sectors were first opened. There are complex reasons for this change, including the higher non-tariff trade barriers in China’s service sector, tougher regulations (including around environmental protection), increasing competitiveness of Chinese domestic companies, and rising labor costs. The result is that many American MNCs have been lobbying the US government to pressure China to further open its market and increase protection of US intellectual property. But that does not mean these corporations would like to see a trade war between the two countries, as it will only lead to a lose-lose situation. In the short term, Chinese companies may be hit harder. But in the long term, the American economy will probably suffer even more.  

At the state level, many states differ with the Trump administration on its perspective regarding a trade war with China. Over the past several weeks, many state governments, including California, Michigan, Kansas and Idaho, have made it clear that they want to continue their cooperation with China. 
At the national level, the economic development and landscape between the US and China remains complementary. For example, if Trump wants to deliver on his campaign promise of rebuilding US infrastructure, he will need to cooperate with China. China’s recent emphasis on domestic consumption, service sector growth, environmental protection and the opening-up of some financial businesses are in the best interests of the US economy. If the complementary nature of the two economies can be more adequately recognized at the three levels, the trade relationship may return to the right track. We must understand the importance of trade issues to the Sino-US relationship from a broader perspective. As Jack Ma, founder of the Alibaba Group, has warned, ‘When trade stops, war starts.’ 
NC: The North Korean nuclear crisis has been a key source of friction. North Korean leader Kim Jong-un visited China recently after agreeing to meet with Trump. Going forward, how will this affect the overall bilateral relationship between the US and China?  

LC: A fundamental change in China’s policy toward North Korea over the past few years is that it now considers denuclearization of the Korean Peninsula as its top priority. In the past, ensuring regional stability was the number one priority. China’s policy change is more a result of a reassessing its own interests in the region than of diplomatic pressure from Washington. While the US and China continue to compete for leverage and influence with regard to North Korea, China’s policy change no doubt is in line with US interests. But if the US chooses to identify China as its enemy, it will be no surprise that China changes its position on relations with North Korea again.  

China has long seen the North Korea issue differently from the US. While Washington attributes North Korea’s defiance to Beijing’s failure to impose a total embargo against Pyongyang, China does not see economic sanctions as the solution. For China, the question is: why should it impose a total embargo against North Korea when such an act could lead Pyongyang to see China as a greater enemy than the US? Such a mentality is further compounded by the perception that the US is establishing an anti-China bloc in the region along with Japan and South Korea. 
If a couple of months ago there appeared room for full cooperation between China and the US on North Korea, that no longer seems the case now that Washington’s policy toward China has turned hostile. The dramatic, warm reception for Kim’s visit in Beijing seems to reflect that change. The price of a deteriorating China-US relationship will be very high in this regard, and I do hope that the two countries can continue cooperating to find a way to achieve denuclearization of the Korean Peninsula.  
NC: Turning to long-term prospects for the bilateral relationship, what are the pitfalls leaders on both sides should avoid in order to steer the China-US relationship away from all-out confrontation?
LC: There are four pitfalls to which leaders of the two countries should pay attention. First, the China-US relationship is vulnerable to the influence of domestic politics. Currently, nationalist sentiment is on the rise in both countries, and both leaderships are subject to the influence of interest groups at home, which may hijack national foreign policy. 

Second, there has been an increasing tendency among policy makers and analysts to perceive the bilateral relationship from a ���zero-sum’ perspective, which is itself a threat. Under the Obama administration, [then-US Secretary of State] Hillary Clinton said that ‘the US and China can benefit from and contribute to each other's success.’ In contrast, the prevailing mentality among decision-makers today appears to be that one can only benefit from the other’s failure. This is a very dangerous prism through which to view the bilateral relationship. 

Third, there is a risk that the two countries’ foreign policies could be hijacked by a so-called third party – another country that intends to advance its own interest – at the expense of either the US or China. 
Finally and most importantly, a Cold War mentality appears to be re-emerging in recent months – a trend that could haunt the bilateral relationship. Washington has become increasingly active in pushing other countries to “choose a side.” Former Secretary of State Rex Tillerson openly called on Latin American countries, for example, to resist China’s influence. If the trend continues and ferments, the bilateral relationship between the US and China could enter a major crisis.