China should really start to worry about Trump

As Europe wins a reprieve over trade the portents for Beijing have commensurately darkened

Edward Luce

US president Donald Trump, pictured here on the right with Chinese counterpart Xi Jinping, has cut himself far more leeway to indulge in China-bashing

It was Wednesday so Europe went from being a “foe” of America to a “great friend”. Next Monday might be different. Perhaps Europe will still be in Donald Trump’s good books. The only person who can say for sure is Mr Trump. Even he probably has little idea. But my hunch is that the ceasefire he struck with Jean-Claude Juncker, president of the European Commission, will hold. Mr Trump loves applause and the last-minute trade agreement with Brussels earned a transatlantic ovation. Europe has won a reprieve. The portents for China have commensurately darkened.

They were already dimming before Mr Trump’s latest rabbit trick. His squeeze on China is now likely to be backed by the Europeans and the US business community. Both have long advocated combined western pressure on China to put foreign investors on a level playing field. Both share deep concern about China’s systemic technology transfer. Neither like the sound of Xi Jinping’s “Made in China 2025” plan, since it aims to eat their lunch on artificial intelligence. Mr Trump has cut himself far more leeway to indulge in China-bashing.

The chances are that he will use it. There are three forces conspiring to worsen US-China relations. The first is politics. As the US midterm elections loom, the temptation to scaremonger on China will grow. It worked for Mr Trump in 2016. Then he accused China of raping the US economy. He said nothing similar about Europe. Then, as now, most Americans associated post-industrial ravage with China. They did not accuse Europe of stealing their manufacturing jobs. Nor did they blame technology, as they should have. It is hard to win an election against robots. Beijing offers a tried and tested target.

The second is geopolitics. Mr Trump needed China’s help during his first 18 months to tighten the screws on North Korea. Without Chinese sanctions, it is hard to imagine Kim Jong Un would have agreed to North Korea’s full denuclearisation. The carrot was the lifting of those sanctions. Anyone could have told Mr Trump that Mr Kim was playing him along. Either way, China will be far less willing to tighten the vice on North Korea a second time. It is already relaxing border restrictions. When the North Korea deal fails, Mr Trump will need someone to blame. At some point Mr Trump is likely to resume the suspended US-South Korea war games, which will escalate tension with China.

China is also on the wrong side of Mr Trump’s Iran policy. As he steps up his rhetoric against Iran, Europe will grudgingly comply. For most European companies, the pain of lost American business far outweighs any earnings prospects in Iran. It is a different calculation for China. During Iran’s last bout of isolation, Beijing was its mainstay. China will step up again. This time, however, it will be in defiance of Mr Trump. Taiwan offers Mr Trump the juiciest prospect of retaliation. He has also rehearsed this one before. The first congratulatory call he took after the 2016 election was from Taiwan’s leader, Tsai Ing-wen. Beijing chose to ignore Mr Trump’s dramatic breach of protocol. It is unlikely to treat him with kid gloves a second time. Taiwan is to China what Cuba was to the US during the Cold War — a bright red line. It will not tolerate any dilution of America’s “One China” policy.

The third is the lack of Chinese flexibility. Mr Trump’s complaints about Europe are exaggerated and hypocritical. He has a far stronger case against China. Should he genuinely want a deal with Europe on industrial goods, which is anybody’s guess, it ought to be possible. Europe’s surplus with the US is barely half of China’s. Both sides of the Atlantic are already relatively open. There is scope for creative negotiation if there is a will.

By contrast, Beijing’s stance is theological. Mr Xi’s “Made in China” goal is to his economic strategy what Taiwan is to China’s national identity. It is non-negotiable. In China’s eyes it is entirely reasonable. China lost face during the so-called “century of humiliation” at the hands of colonial powers. It is now well into its century of restoration. It will take more than bluster to persuade Mr Xi to change course.

Are the US and China destined to clash? No. But it is becoming easier to imagine. Mr Xi will try to play the waiting game. He will find opportunities to let Mr Trump declare cosmetic wins. But his margin for error is shrinking. Mr Trump is not the type of president to bide his time.

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