The official Chinese reaction to Donald Trump’s election victory has been almost to ignore it, apart from a congratulatory phone call from Xi Jinping and a few anodyne statements. And there appears to be no agreed view among academics and commentators about the approach Trump will take to China or what Beijing should do about it.
“Typically, in this political system, in this policy process, there is a very clear position articulated from the leadership through the foreign ministry and other government agencies and in the official media on how to analyse it, on what the problem is and what the policy is to tackle it. And for the moment, at least, we don’t have that in this case,” said Scott Kennedy, a leading American expert on China’s politics and economy at the Centre for Strategic and International Studies, during a visit to Beijing this week.
US-China relations enjoyed a brief honeymoon at the beginning of Trump’s first term as president, during which he served cake to Xi at Mar-a-Lago. But a dispute over allegations that China stole American intellectual property spiralled into a trade war by the summer of 2018 with the US imposing four rounds of tariffs on Chinese imports.
China retaliated with its own tariffs on US goods, including agricultural products, and after 18 months the two sides reached a deal in January 2020. Soon after that, however, Trump blamed China for the coronavirus pandemic and imposed a range of sanctions, including technology restrictions, travel bans and the expulsion of Chinese journalists from the US.
This time, Trump has threatened to impose a 60 per cent tariff on all Chinese imports and Kennedy believes he is likely to do something like that, although it is not clear how effective it will be.
“It’ll be harder for the US to engage in a strategy of shock and awe because they’ve already been previously shocked and awed. They’re better prepared for the uncertainty and volatility and individual measures simply by having had that experience. In addition, I think the Chinese have already used the last several months to game out the election and potential strategies, tactics of the incoming Trump administration, and also evaluate the potential economic effect on China,” Kennedy said.
“On the other hand, China as a whole is maybe a little bit more fragile than it was then. And so they shouldn’t be overly confident about their ability to respond because some of the ways in which they might respond might actually create more domestic anxieties and have other kinds of unintended consequences for them.”
Although China has taken a number of steps in recent weeks to loosen credit rules and ease the debt burden on local governments, it has disappointed markets by taking much less action on the fiscal side. The general view in Beijing is that the authorities are waiting to see the extent of any Trump tariffs and their likely impact before unleashing a comprehensive stimulus package.
Beijing has also been preparing for a second Trump presidency with a charm offensive directed towards the rest of the world, including the European Union. Although China and the EU are involved in a number of trade disputes, Beijing has been fairly measured in its response, both in action and rhetoric.
This is in marked contrast to the thin-skinned Chinese reaction to every diplomatic slight only three or four years ago, which saw sanctions imposed on a number of members of the European Parliament who criticised human rights abuses in Xinjiang. Those sanctions could be lifted in the coming months as part of an effort to woo Europe that might also include increased market access for European companies and concessions on industrial policy.
Kennedy believes that US allies in Asia as well as in Europe are more likely to resist pressure to fall into line behind new measures against China if Washington is perceived to be unreasonable.
“I think if the US were to shift from a strategy of trying to mitigate risks from derisking to decoupling, then that would run head-on into opposition from others who believe that you can both mitigate the national security risk while having a robust commercial relationship. Actually, there are elements of the commercial relationship which provide national security benefits to those other countries,” he said.
“I think if there is that difference, then those tensions would translate into greater frictions and provide China opportunities not only to continue to develop these technologies, but potentially, instead of having itself be isolated, having the US end up more isolated than it otherwise would want.”