The United States of Sanctions
The Use and Abuse of Economic Coercion
When U.S. President Donald Trump lands in Beijing this week, he will find a Chinese counterpart, Xi Jinping, at the apex of his own political power and contemplating a status quo in Asia increasingly tilted in China’s favor. In most Asian capitals, as in Washington, Trump’s arrival in the region for an 11-day trip has prompted acute anxiety about what he might say or do. This is especially true regarding trade issues and North Korea, the two focal points of the U.S. administration’s still-nascent Asia policy. But in Beijing, Xi and the rest of the Chinese leadership can be more sanguine: since last November, China has succeeded in appearing to more and more of Asia as the steady, stable great power alongside an unpredictable and undependable United States.
That means that when Trump begins his first state visit to China on Wednesday—arguably the highest-stakes stop on his regional tour—Xi will hold not just the usual home-court advantage but also asymmetric advantages on the key issues the two leaders will discuss. Trump seeks significant changes in areas of Chinese national interest, but Beijing need only protect a status quo on trade and on North Korea that it sees as largely advantageous. To make matters worse, Trump’s China and Asia strategies remain muddled because of competing factions within his administration and his tenuous domestic position. Xi, accordingly, will seek to manage Trump, giving him a lavish welcome in China but few policy wins of any lasting significance—while capitalizing on a growing regional perception that an inexorable power transition is occurring, with a United States in terminal decline and all the key trends working in China’s favor.
XI’S ALL THAT
In late October, China concluded its 19th Party Congress, a major leadership milestone that left Xi in a historically strong position. His name and philosophy were enshrined in the party constitution, raising him to the level of Mao Zedong and Deng Xiaoping, and he refrained from anointing a clear successor, suggesting that he may disregard recent Chinese political norms and remain in power for years to come. He is now certain to remain the party’s most commanding voice as long as he lives.
On foreign policy, Xi used his new stature to celebrate China’s status as a great power and exhort his country to take a leading role on the world stage. His message built on a troubling regional narrative: that China is ascendant and that a declining United States can no longer be trusted as a major power in Asia. This narrative is not new: as China has continued its rapid rise, overhauled its military, and pursued a more muscular foreign policy, scholars and policymakers alike have wondered whether the United States could maintain its dominant security role in Asia. But beginning shortly after the 2016 presidential election, Xi took the story a step further, encouraging the perception of a major power transition in Asia and positioning China as a more dependable great power alternative to the United States.
In a disingenuous speech at the World Economic Forum in Davos last January, Xi claimed for China the mantle of globalization, implying the start of a post-American international economic order. In the months since, he has regularly highlighted the United States’ apparent disengagement on key international issues, including its withdrawal from the Trans-Pacific Partnership and the Paris agreement on climate change, along with its threats to bilateral trade pacts and its erratic North Korea policy. He has exploited the regional perception that Trump is uninterested in Southeast Asia, uncommitted to the United States’ alliances, and indifferent to other aspects of the so-called international order in Asia. Xi has used these recent U.S. policy choices to claim the role of the adult in the room, a refreshing contrast to an erratic United States. By hosting a grand state visit with the world’s reigning power so soon after the congress, Xi’s announcement of China’s major power status will come to life, and the region will be reminded of the deep uncertainty that surrounds the future of the United States’ role in Asia.
OF DENUCLEARIZATION AND DEFICITS
The first nine months of his presidency have seen Trump focused almost exclusively on two regional policy issues: trade deficits and the North Korean nuclear threat. Nowhere will these issues take on higher billing than in China, where Trump is pressing Beijing to reduce the bilateral imbalance and to crack down on Pyongyang. The trouble is that significant victories on either issue would require major sacrifices to China’s perceived national interest. Xi will thus find it easier to protect his policy interests than Trump will find it to advance his own—especially as his Chinese hosts occupy him with lavish banquets and grand honor guards and extended tours of Beijing’s antiquities. Trump is looking for significant changes in China’s economic and security policy, whereas Xi is satisfied with a welcome status quo. He is well positioned to mollify Trump with superficial concessions rather than seek out real compromise.
Xi is well positioned to mollify Trump with superficial concessions rather than seek out real compromise.
On trade issues, Trump has long hewn to a hawkish “America First” economic message: China engages in predatory economic practices, takes advantage of international rules and multilateral organizations such as the World Trade Organization, and steals American jobs. The solution, he argues, is for the United States to reduce its trade deficit. (The fact that most economists do not find deficits in themselves problematic has not changed this line of thinking.) Yet the administration has not presented a real plan for how exactly it plans to reduce that deficit, which has in fact grown since it has been in office. Instead, it has put in place some specific protectionist measures (anti-dumping provisions on aluminum foil, for instance), without presenting a broader trade strategy.
If Trump were to offer a concrete vision for his trade policy, push China to make its own economic reforms, and ask for specific concessions, he might have some chance at modest progress. After all, Chinese leaders would like to avoid an economic clash with the United States. But simply demanding a “fairer” economic relationship in broad terms allows Xi to offer up splashy but inconsequential deals that have no material impact on the overall trade relationship. Accordingly, even if Xi and Trump sign import and investment agreements, as anticipated, Trump’s demands will do little to either reduce the trade deficit or restore American jobs (which have largely been lost to automation, not to China). Xi, meanwhile, will maintain focus on his central domestic challenge: China’s difficult transition from a manufacturing to a consumption-led economy.
On North Korea, Trump and his cabinet officials routinely contradict each other on the administration’s approach, but one element of their policy is clear. Since his early days as a presidential candidate, Trump has insisted that China has the power to “solve the North Korea problem” should it wish to do so. He spent the first few months of his presidency on a charm offensive with Xi, hoping to convince him to punish China’s wayward ward. Even after this opening gambit failed to stop Pyongyang’s missile and nuclear tests, or North Korean leader Kim Jong Un’s aggressive rhetoric, Trump has remained fixated on China’s role. His own escalatory North Korea rhetoric, including his “fire and fury” and “locked and loaded” comments, may have been meant to scare China into action.
Because it supports over 90 percent of North Korean trade, China does have significant leverage should it choose to use it. The trouble is that although Beijing, like Washington, would prefer to see a denuclearized Korean Peninsula, its first priority is to maintain stability, avoiding a regime collapse that would spill refugees and potentially loose weapons of mass destruction over the Chinese border. Xi may have shown that he is willing to apply economic pressure to Pyongyang, but only insofar as it does not risk destabilizing the regime.
Meanwhile, rather than conveying a serious risk of military action, Trump’s recent pronouncements have given China the opportunity to paint the United States as an aggressor. To lower tensions, China has offered up a “freeze for freeze” proposal, in which the United States would stop military exercises with South Korea in exchange for a North Korean moratorium on nuclear and missile testing. China knew full well that neither Washington nor Pyongyang would accept the gambit, yet it preferred to shift the burden of action back onto the United States. China would like to see the parties wind up at a negotiating table, but its leaders bristle at the notion that the problem is theirs to solve—or that it is really solvable. As in the United States, most Chinese experts believe that North Korea will not give up its nuclear weapons, no matter what Beijing does.
HE SAID, XI SAID
In contrast to Xi’s domestic political and foreign policy confidence, the Trump administration is still struggling to define its Asia policy. It is not unusual for a president to still be crafting an approach to the region nine months in—the Obama team unveiled the Pivot to Asia in 2011—but Trump’s China problems are far more fundamental, with a deep divide between different camps compounded by broad disengagement from Asia in the first months of his presidency.
In the months after inauguration, senior administration officials seemed to be divided into two camps: economic nationalists such as Steve Bannon, Robert Lighthizer, and Peter Navarro, who were keen to threaten trade wars; and accommodationists, exemplified primarily by Jared Kushner, who favored a soft approach to Beijing. In recent months, Secretary of Defense James Mattis and Secretary of State Rex Tillerson have offered a more traditional vision for the U.S. role in Asia, based on alliances and strong American leadership. They have recently debuted an “Open Indo-Pacific” framework, adopting terminology developed during the Obama administration to craft a vision for U.S. engagement in Asia, including competition with China. Yet at the same time, White House Chief of Staff John Kelly declared that China was not a competitor but simply another great power, while both CIA Director Mike Pompeo and Trump himself lavished praise on Xi for his consolidation of power at the 19th Party Congress.
This cacophony means that the region is receiving muddled signals on the U.S. approach to China. Does the Trump administration see China as a competitor? As a benign peer worthy of praise? This is not simply a matter of inconsistent public diplomacy. With few political appointees working on Asia confirmed at the State and Defense Departments, cabinet-level dissonance swamps any real attempts at policy. China can easily exploit the rifts within the Trump team, using them both to ensure that it will not come under undue pressure and to advance the narrative that the United States is unpredictable.
If Trump were determined to reverse the narrative of China’s ascendance and U.S. decline, he would have plenty of raw material to work with. The United States holds numerous strategic advantages over China, including its geography, its energy independence, it currency, and the reach and density of its global ties. Even if China continues to rise at its rapid rate, the United States will remain globally preponderant for decades to come. Trump could articulate a holistic vision for Asia, perhaps embracing his advisers’ “Indo-Pacific” framework, and rather than focusing narrowly on trade and North Korea with a unilateralist “America First” slant, he could unequivocally reaffirm U.S. alliance commitments to South Korea and Japan, seek to repair a fraying relationship with South Korean President Moon Jae-in, and avoid criticizing either ally or threatening unilateral military action against North Korea. He could commit to working with existing agreements, such as the U.S.–South Korean trade deal, rather than overturning them, and play a constructive role at the two regional summits he will attend later in his trip, an Asia-Pacific Economic Cooperation meeting in Vietnam on November 11–12 and the East Asia Summit in the Philippines on November 13–14.
Each of these moves, however, would be antithetical to a president whose instincts have long led him to malign allies, to denigrate trade deals and international organizations, and to see international politics as a set of zero-sum transactional exchanges. Xi, by contrast, has only to get through Trump’s visit with some symbolic deals and few meaningful results—as he confidently launches the next phase in his ongoing narrative of Chinese ascendance and American decline.