What Should Come After Trump’s Failed China Policy?

July 6, 2020
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Of all the Trump administration’s foreign policy failures, it is hard to think of one more comprehensive — or consequential — than its China policy. Candidate Donald Trump made China a central issue in his 2016 election campaign, claiming the United States was getting “ripped off” and promising that he would put an end to the failures of his predecessors, who had “allowed China to rape our country.” The “tougher” approach Trump was offering would, he said, “end our chronic trade deficits;” deliver a new trade deal; bring manufacturing jobs back to the United States; put an end to China’s dumping, alleged currency manipulation, illegal export subsidies, and intellectual property theft; and compel Beijing to be more supportive of U.S. efforts on issues such as North Korea and Iran. The promise to defend American workers from China’s nefarious trade practices clearly resonated politically, and was almost certainly a decisive factor in Trump’s narrow electoral victory over Hillary Clinton in 2016.

Nearly four years later, none of these goals have been realized, and it is hard to think of a single aspect of Sino-American relations that has evolved favorably for the United States. The bilateral trade deficit rose during Trump’s first two years and is now around the same size as when Trump took office. U.S. goods exports to China have fallen every year since 2017. Manufacturing jobs have not returned to the United States. Most of China’s nefarious trade and cyber practices have continued or even expanded. The narrow “phase one” trade deal Trump announced in January did little more than lift some of the tariffs Trump had imposed on American importers in exchange for Chinese promises to purchase more American goods that will almost certainly never be fulfilled. Internationally, China has reneged on its commitments to respect Hong Kong’s autonomy and continued to expand its military activities in the South China Sea. It has sunk or harassed ships from Vietnam, Malaysia, and Japan, confronted India militarily over a disputed border, launched multiple cyber-attacks against Australia, and done little to support U.S. diplomacy on North Korea and Iran. Meanwhile, China is domestically increasing repression and brutally imprisoning nearly a million Uighurs in Xinjiang, with Trump’s apparent approval.

Notwithstanding Trump’s aggressive courtship of President and Communist Party Chairman Xi Jinping — as recently as late February 2020 Trump was praising Xi’s “hard work” and “transparency” and claiming the relationship was “very good” — bilateral diplomatic relations are in tatters. Trump and Xi have not spoken since March 27. The U.S. national security advisor, Robert O’Brien, now compares Xi to Stalin. Secretary of State Mike Pompeo denounces China as “predatory” and “belligerent,” while official Chinese media calls Pompeo “wicked,” “deranged,” and “the public enemy of mankind.” Trump’s decision to blame China for tens of thousands of American deaths from what he now calls “the China plague” and the “Kung Flu” is unlikely to improve matters. Far from forging either a better relationship or reaching a better trade deal, the two countries now risk sliding into a new form of Cold War that could deeply damage U.S. interests — or even lead to a devastating military conflict. A May 2020 White House report effectively outlined the challenges posed by Beijing, but as the China scholar Zack Cooper noted, its authors faced the “impossible task” of building “a coherent and consistent approach to China out of an incoherent and inconsistent set of administration positions and actions.”

 

 

A rising, nationalistic, and repressive China that is unwilling to respect global rules and norms poses an unprecedented geopolitical challenge for the United States. Even during the Cold War rivalry with the Soviet Union, the United States did not face a rival with the potential to be a genuine peer competitor — potentially equaling or surpassing American economic, political, and military power — as China does now. The response to this challenge, however, is not the fantasy of “decoupling” the U.S. economy from China’s — which would impose enormous economic costs on Americans even if it were somehow possible — let alone to demonize China and treat it like an enemy, which could easily become a self-fulfilling prophesy. Instead the United States should develop a comprehensive strategy to defend its interests and compete with China based on domestic and economic renewal, leveraging global alliances, bolstering regional deterrence, and clear-eyed dialogue with Beijing. Politically, Democrats who want to persuade the American people they have a better plan for China need to avoid falling into the trap of trying simply to appear tougher than Trump and keep in mind the old adage that you can’t fight something with nothing. Fortunately, there is an alternative strategy on China that makes far more sense than Trump’s failed approach.

A Flawed Diagnosis

Trump’s approach failed for a number of reasons, starting with the misguided notion that simply getting “tough” on trade by imposing heavy tariffs could curb nefarious Chinese trade practices and rebalance the trade relationship. Trump asserted early on that “trade wars are good and easy to win,” but it should have been obvious that neither of those assertions is true — especially if the U.S. launches those trade wars all alone. Quick to criticize his predecessors, Trump failed to learn the right lessons from their experiences. In the early 1990s, President Bill Clinton campaigned as a China hawk and announced he would deny trade benefits to China until it improved its human rights record, but then backed down when it became clear that strategy was not going to work and was hurting the U.S. economy as much as China’s. President George W. Bush imposed unilateral steel tariffs on China and other countries in 2002, leading to some 200,000 jobs lost in U.S. businesses that buy steel;  this was more than the number of jobs in the entire steel industry and ended up costing taxpayers more than $400,000 per steel job saved. President Barack Obama imposed 35 percent tariffs on Chinese tires in 2009, which led to a rise in tire prices and a surge of imports from South Korea, Indonesia, and other Asian countries; the tariffs saved only around 1,200 manufacturing jobs while leading to losses of 2,500 retail jobs and costing U.S. poultry producers $1 billion after China retaliated.

Trump seemed to believe that just adding more and higher tariffs and maintaining them for longer would produce better results, but so far history is repeating itself both as tragedy and farce. Three and a half years into his presidency, Trump’s trade war has led to the loss of around 300,000 U.S. jobs, a tax of some $46 billion on U.S. importers (most of which has been passed along to consumers) and at least $28 billion in taxes to compensate U.S. farmers for the markets they lost when China retaliated. When asked in 2018 if he feared that China would retaliate for the U.S. tariffs, Trump’s hawkish trade adviser Peter Navarro said “I don’t believe any country is going to retaliate for the simple reason that we are the most lucrative and biggest market in the world,” but Navarro was wildly and predictably wrong. Also predictable was that even to the extent the tariffs did curb U.S. imports from China, the result would not be a return of manufacturing jobs to the United States, but simply a displacement of those imports to other low-cost producers such as Vietnam, South Korea, and Mexico. The U.S. trade deficit with all those countries has only grown since Trump took office, as it has with Canada, the European Union, and the world as a whole.

Conceptually, Trump’s approach was also flawed by an exclusive focus on the costs of strategic and economic engagement with China while neglecting its benefits. It is now widely accepted that engagement with Beijing did not lead to the political openness that past U.S. presidents — especially Clinton and Bush — had claimed it would. But converting China into a liberal democracy was never the primary or only reason for engagement. President Richard Nixon and his national security adviser Henry Kissinger did not pursue the opening to China in the early 1970s out of the sentimental notion of advancing freedom for the Chinese. They did so because China, even when it was weak, had for decades thwarted U.S. foreign policy aims in the region; abetted nuclear and missile proliferation; complicated efforts to contain the Soviet Union; and contributed to the deaths of thousands of Americans in the Korean and Vietnam Wars. Opening to China hardly made it a friend or ally of the United States, but the benefits of not having it as an enemy have endured for so long they are now largely taken for granted.

Similarly, U.S. economic engagement with China has hardly been the one-way street in the wrong direction that Trump consistently implies. Trump talks about “losing $500 billion to China,” as if Americans have not been benefitting from it for decades. These benefits include low-cost consumer and electronic goods, inputs for high-end manufacturing exports, and a surplus in services trade with an increasingly wealthy China, as well as relying on the Chinese to buy and hold $1 trillion in bonds needed to finance persistent U.S. budget deficits. As 800 million Chinese citizens emerged from poverty after the economic opening that began in the late 1970s, China also became the fastest growing destination for U.S. exports anywhere in the world for 15 straight years (growing by 86 percent from 2008 to 2017). Beijing’s willingness to work with Washington on an economic stimulus plan in the wake of the 2008-09 world financial crisis helped stave off a global depression. Today General Motors sells more cars in China than in the United States and Starbucks has more outlets in Shanghai than anywhere else in the world. While there are clearly deep problems with the U.S.-Chinese economic relationship, and U.S. leaders should have done a much better job taking care of Americans who lost jobs due to shifting supply chains, Trump’s notion that the United States could “save $500 billion” if it “cut off the whole relationship” with China is misguided and dangerous.

Finally, Trump’s approach has been flawed by the fantasy that he could translate a personal relationship with Xi into a better trade deal. From the start of his presidency (after a brief flirtation during the transition with recognizing Taiwan as an independent state) Trump courted and praised the Chinese dictator, congratulated him for consolidating power, promised to tone down criticism over Hong Kong, and remained silent on massive human rights abuses in an attempt to preserve those personal relations and pave the way for a trade deal. After inviting Xi to Mar-a-Lago in April 2017, Trump claimed to have “great chemistry” with the Chinese leader, bonding over “the most beautiful piece of chocolate cake that you’ve ever seen.” The problem with the plan was that Xi is an unsentimental autocrat trying to run a country of 1.4 billion people who believe China’s time has come. The idea that he would take personal affection for Trump — even if it existed — into account as he pursued China’s “national rejuvenation” was always naïve.

The Four Pillars of a Better Approach

There is no silver bullet for dealing with a stronger and more assertive China, but there is an alternative to Trump’s failed approach. A smart policy on China would set aside the illusion that the United States can shape internal political outcomes in Beijing or that it can prevent China’s rise. Instead it would rely on four basic pillars, designed to better compete with China strategically and economically, while also cooperating where it serves U.S. interests, and avoiding a new Cold War.

Invest at Home

The main element in any long-term approach to competition with China, as several recent task forces and others have argued, must be rebuilding U.S. economic strength and domestic unity. Given China’s size and irreversible integration with the world economy, preventing its emergence as a major power is a lost cause; the only realistic way to compete with it is for the United States to be stronger, more united, and a more appealing model and leader itself.

This means reversing the Trump administration’s cuts in research and development and basic science programs, and instead increasing federal support for innovation, education, artificial intelligence, transportation and telecommunications infrastructure, as well as for health care and training programs so U.S. workers can better withstand the shocks of global economic integration. It also means repealing Trump’s trillion-dollar tax cut for the wealthiest Americans, which has exacerbated the budget deficits that are more responsible than anything else for the trade gap with China. No level of tariffs will reduce the overall U.S. trade deficit so long as the United States is borrowing money from China and elsewhere to finance it, driving up the dollar and making U.S. goods expensive relative to foreign-made products.

A smarter immigration policy will also be necessary. Trump’s decision in June 2020 to freeze green cards and new immigrant visas could not be more counterproductive to the effort to strengthen the U.S. economy and compete with China. If kept in place, it would only shackle the very U.S firms that are trying to compete with China, preventing them from hiring not just top engineers, information technology specialists, and computer programmers, but also the doctors and nurses who help keep them healthy, or the foreign au pairs they rely on to go to work.

Chinese military and industrial espionage are serious concerns, but keeping Chinese students out of the United States, as Trump and many of his supporters advocate, is not the right way to deal with it. No foreign students should be working on sensitive military areas in any case, but better background checks and vigorous prosecution of anyone caught spying are better remedies than a blanket rejection of Chinese talent. To the extent that Trump’s student visa policies are designed to prevent China from acquiring scientific knowledge, the reality is that if Chinese students are kept out of the United States, they will simply study in Australia, the United Kingdom, Canada, or Germany, all of which will benefit from their scientific contributions, and in many cases from their eventual citizenship. Education for foreign students is also one of the United States’ largest exports, accounting for some $45 billion in foreign student spending on goods and services such as rent, clothing and food, in contrast to the $7.6 billion U.S. students spent abroad.

Perhaps most important to recovering U.S. strength in dealing with China would be healing the domestic divisions and preserving the democratic ideals that give the United States a comparative advantage. As the former diplomat, Rep. Tom Malinowski has put it, to compete with China “the United States has to be everything that China under dictatorship is not: well governed, intolerant of corruption, respectful of privacy, protective of truth-tellers and willing to help — rather than bully — the world.”

Leverage Alliances

One of greatest American advantages over China is that the United States has close allies and partners all around the world whereas China only wins international support out of fear or economic incentive. Unfortunately, Trump’s persistent mistreatment of close allies and his “America First” platform have severely weakened U.S. alliances and allies’ trust in the United States. According to a recent poll of 32 countries, confidence in Trump to “do the right thing” in international affairs is now just 29 percent, down from 74 percent in President Obama’s final year in office. Confidence in Trump among those countries is now only one point higher than Xi, while Germans are now virtually equally divided on whether the United States (37 percent) or China (36 percent) is their closest partner.

Trump not only weakened alliances in general, but specifically failed to use them to enhance leverage in negotiations with China. Indeed, far from developing an international strategy that prioritized China, Trump imposed new tariffs on even Washington’s closest allies — Japan, South Korea, India, Canada, Mexico, Turkey, the European Union, and Australia — at the same time. China responded not just by retaliating against the United States but by lowering tariffs against other countries by around 14 percent, to the benefit of Brazilian and European farmers, Mexican and European manufacturers, and Canadian fisherman, but at a high cost to the United States. The U.S. share of the world economy is around 24 percent, whereas together with these other countries it is over 60 percent; logic suggests a common approach to China would be far more effective. Instead of gutting the World Trade Organization, as Trump has been doing, the United States could also work with these partners to strengthen its dispute-resolution mechanisms, expand its coverage of investment and intellectual property rights, and hold China accountable to the commitments it has made. Over the past 16 years, the United States has challenged Chinese practices 23 times, winning 20 of them with three cases pending, while China has won only around one-third of its cases against the United States.

Nor should the effort to work with allies to help push back on unfair Chinese practices be limited to trade. Indeed, a formal move to convert the current Group of Seven (G7) industrialized democracies into a G9, G10, or G11 — by adding Australia, South Korea, and India (perhaps along with a seat for the European Union) — would create a powerful group of democracies that could coordinate their approaches to China on broader issues, including human rights, technology and competition policies (including regarding 5G infrastructure), climate change, and regional security. Unilateral U.S. approaches to these and other issues only go so far; coordinated positions of the world’s leading democracies would be a more powerful tool.

Bolster Regional Deterrence

For all Trump’s tough talk on China, his policies have almost certainly weakened U.S. efforts to contain Beijing’s regional military expansion and left allies wondering about the value of U.S. defense commitments. Trump flirted with the idea of cutting back support for Taiwan in order to curry favor with China before backing away — at least for now. He has repeatedly threatened to withdraw U.S. troops from South Korea and Japan and demanded outlandish sums (up to five times current levels) from Seoul and Tokyo to maintain the U.S. military presence, steps that only embolden China and could lead insecure allies in the region to align with it. As part of his failed courtship of North Korean dictator Kim Jong Un, Trump agreed to halt vital military exercises with South Korea — a decision he made without even informing the Pentagon or U.S. allies in Seoul. The risk, as former U.S. Undersecretary of Defense Michèle Flournoy has written, is that “the more confident China’s leaders are in their own capabilities and the more they doubt the capabilities and resolve of the United States, the greater the chance of miscalculation — a breakdown in deterrence that could bring direct conflict between two nuclear powers.”

To restore deterrence and reduce the risks of Chinese miscalculation, a new administration will have to recommit to these defense partnerships; prioritize area-denial capabilities to raise the costs of potential Chinese aggression; invest in the hardening of U.S. bases, logistics lines, and regional communications networks; and work with regional allies to bolster their resilience in the face of attacks, including cyber-attacks. Rather than trying to extort these allies for more cash, it should negotiate allied burden-sharing arrangements in good faith, recognizing the strategic benefits to the United States of forward deployed forces on bases largely paid for by the host countries. The United States will also have to do more to rebalance the American military’s global force posture away from large deployments in the Middle East — which Trump promised but failed to deliver — and enhance its posture in the Indo-Pacific region. It should not be impossible, as former Obama administration officials Kurt Campbell and Jake Sullivan have pointed out under the label “competition without catastrophe,” for the United States to deter Chinese military expansion and defend its allies’ sovereignty while avoiding an open-ended arms race with China, let alone a military clash.

Talk to China

Finally, even as it seeks to compete with China, curb Beijing’s market-distorting practices, and contain Chinese expansionism, the United States must continue to deal directly with China and explore practical cooperation to advance its own goals. For all their differences, Washington and Beijing share strong interests in maintaining global economic growth, curbing climate change, preventing nuclear and biological weapons proliferation, preventing and managing pandemics, and above all avoiding inadvertent military conflict. Finding common ground and working together in such areas will not be easy — as China’s failure to act transparently and cooperatively at the start of the coronavirus pandemic most recently underscored. But cutting off dialogue and reverting to name-calling only makes that task more difficult, while abetting and empowering China’s most assertive and confrontational nationalists. Americans should not imagine that China will be a geopolitical partner, but neither should they fail to appreciate what the world would look like with China as a determined enemy, actively seeking to undermine U.S. goals everywhere from Iran to North Korea, Afghanistan, and beyond.

Nor should Americans forget that for all its bluster and self-confidence, China also needs interaction and stable relations with the United States — even if it doesn’t always appear to recognize that need. It is experiencing its slowest growth in 30 years, record high unemployment, growing environmental degradation, global reputational damage, ongoing threats from infectious disease, and growing tensions with a range of neighbors. A United States that invested in its own technological and scientific capabilities and domestic unity, rebuilt and leveraged its relationships with global allies, and restored regional deterrence, would be well placed to engage and compete with China. In the wake of the Trump administration’s failure to translate unilateral tariffs, political confrontation and nationalistic demonization into anything other than a collapsing relationship, such dialogue — from a position of greater strength — cannot come soon enough.

Keeping Eyes on the Prize

Americans are right to be concerned about the geopolitical implications of a rising China and to be angry about Chinese trade practices, shocking violations of human rights, lack of transparency, and regional expansionism. But concern and anger are not policies. The Trump administration has been good at identifying the problems posed by China’s approach to the world but far less effective in dealing with them. It is time for a new approach, based not only on what the United States would like to achieve with China, but on realistic plans and more effective tools to achieve it.

 

 

Philip H. Gordon is the Mary and David Boies Senior Fellow in U.S. Foreign Policy at the Council on Foreign Relations and a former senior State Department and White House official in the Obama administration. His book, Losing the Long Game: The False Promise of Regime Change in the Middle East, will be published in October 2020.

Image: White House (Photo by Keegan Barber)