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As the election haze clears, Trump’s China conundrum will become clear

Donald Trump’s intention to slap a 45% tariff on Chinese goods is unlikely to be welcomed by the country’s president, Xi Jinping. Photograph: Fred Dufour/AFP/Getty Images
Donald Trump’s intention to slap a 45% tariff on Chinese goods is unlikely to be welcomed by the country’s president, Xi Jinping. Photograph: Fred Dufour/AFP/Getty Images

It may well be the greatest test of whether the cold reality of office dampens the campaign rhetoric of the next occupant of the White House. Out on the stump, there was no doubt which country Donald Trump held most guilty for the loss of American jobs and saw as the major obstacle to making America Great Again. But going head to head with China would involve a nexus of problems that a business-savvy chief executive should wish to avoid. So will Trump’s natural combativeness and the pumped-up feelings of his core supporters prevail, or will reason force itself on him?

The China conundrum is emblematic of the huge uncertainty surrounding the president-elect. We know the campaign rhetoric about slapping a 45% tariff on Chinese goods. We know that he accuses Beijing of being a currency manipulator and using America as a “piggy bank”.

We know the person he endorses as “right on” about China, university professor Peter Navarro, sees war with the People’s Republic as “very likely”, argues that “Bill Clinton sold America down the Shanghai River”, and urges the US to fight China’s mercantilism by being tough on trade and taxing China’s exports.

But President Trump would be well advised to steer away from the rhetoric of Candidate Trump in dealing with the world’s second biggest economy and the rising superpower, accepting the all-important nuances of the world’s single most important relationship.

When Deng Xiaoping perceived at the end of the 1970s that the way to make China great again and to save the Communist party from implosion was to pursue economic growth, he turned to exports. The bargain that emerged suited everybody, and led to the entry of the People’s Republic of China (PRC) into the World Trade Organisation in 2001. China got its growth from selling cheap goods abroad, and attracted foreign investment and technology.

Rich countries, led by the US, got cheap imports that kept down inflation and satisfied consumers. The deal got even better when Beijing recycled its earnings into US government bonds, providing capital to help fuel a credit binge.

That changed in the aftermath of the 2008 global financial crisis. Barack Obama skirted round the China question as best he could. Now Trump has to decide how to proceed. It is no longer simply an economic issue.

Abandoning Deng’s advice to keep a low international profile, Xi Jinping aspires to walk tall beside any president from across the Pacific. Though far behind America in terms of overall military strength, the PRC has been building up its forces and asserting its presence in the South China Sea. Forecasts that it will rule the world are confounded by a host of political, economic, social and strategic factors. But, for a president who aspires to make America the unchallenged world champion, the presence of a country intent on becoming equal geopolitical number one can only be troubling.

There is no shortage of issues on which to confront China, stretching from trade through intellectual property rights to the mainland’s reef-building programme in the South China Sea and its unwillingness or incapacity to bring North Korea to heel. One might even add human rights, if they seemed a matter of concern to any of the presidential candidates. But if Beijing comes under pressure on one front, it is likely to react on another. The economic story is interconnected; slapping tariffs on products made in China may play well in depressed manufacturing areas, but there would be a big negative effect on US firms with plants on the mainland, or which assemble goods there – and Chinese retaliation would hit their important mainland revenues.

Beijing is making the most of the electoral outcome, its media warning that this is what democracy brings. It will seek to exploit doubts about a Trump administration’s engagement in the fraught situation in east Asia – not only over Korea and the South China Sea, but also with animosity between China and Japan, the unresolved matter of Taiwan and growing the way the US urged governments to participate in the Trans-Pacific Partnership and then repudiated the trade deal.

Trump’s talk of changing the relationship with allies adds to the discomfort. The Japanese prime minister, Shinzo Abe, quickly booked himself a meeting with the president-elect, who is said to regard treaties as akin to contracts open to renegotiation.

Four decades on from China’s economic opening-up, there is little mutual trust between it and the US, but each knows it needs the other. A grand deal between Washington and Beijing remains highly elusive. If Trump were to aspire to seek it – in a new, realpolitik framework – he would have to turn his back on core voters and manage a multifaceted strategy at odds with the simplicity of his campaign and his isolationist tendencies. Hence the importance of the test – and the probability that each side will continue to prefer to rub along with the other.

This article was first and originally published in the guardian UK.

 

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