President Donald Trump blames China for the long prevalent U.S. trade deficits and several other social and economic deficiencies.

President Donald Trump blames China for the long prevalent U.S. trade deficits and several other social and economic deficiencies.

In recent years, President Donald Trump blames China for the long prevalent high U.S. trade deficits against the middle kingdom. Now China seems to hollow out the American industrial homeland from smartphones and semiconductor microchips to electric vehicles (EV), drones, high-speed broadband networks, cloud services, and even large language models (LLM) for generative artificial intelligence. President Trump further blames China for causing the Covid pandemic crisis worldwide. Also, President Trump accuses China of attacking the U.S. and its western allies with fentanyl in the current opioid crisis. Given his U.S. domestic economic protectionism, President Trump seeks to double down on the hardline trade war with China. Specifically, President Trump seeks to impose hefty tariffs, export restrictions, and indefinite bans on many foreign investment categories against China. As President Trump moves into his second term, he continues to view China as a geopolitical adversary in a zero-sum game. In order to make America great again, many supporters seem to think only President Trump and his hardcore cabinet members can come up with hardline economic policies, sanctions, and regulations to tame the respective foes and rivals in Beijing. Political tensions between the U.S. and China continue to persist and even exacerbate in recent years. As a result, the bilateral relations between the U.S. and China seem to rest on flimsy foundations. Nowadays, geopolitical alignment often reshapes and reinforces asset market fragmentation in the wider context of financial deglobalization. Around the world, several western governments seek to incorporate new elements of global resilience into economic statecraft.

 

Today Chinese leaders face few fears, phobias, and insecurities in China’s bilateral relations with America.

In China, President Xi Jinping and his cabinet members may not view the new Trump second term with fear and trepidation. These Chinese leaders, technocrats, and diplomats already learned much from the Trump first term, the Biden administration, and the populist return of Donald Trump to the White House in recent years. President Trump tends to apply economic protectionism across many industrial sectors and categories with fresh geopolitical tensions and frictions on the global stage. Early in his second term, President Trump declares retreats from the international Paris climate agreement, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and even the World Health Organization (WHO). In effect, these complete withdrawals highlight the fact that the new Trump administration tends to undertake unilateral measures in support of greater economic protectionism in America. Despite the growing trade tensions, disputes, and frictions between Beijing and Washington, the Xi administration still seeks to navigate new confrontations in global trade, finance, and technology. Also, the new Trump administration may impose new tariffs and other economic sanctions on Canada, Mexico, and some other western allies. This hardline approach would encourage many countries, such as France, Germany, Japan, and Australia, to hedge their foreign investment bets outside North America. Specifically, these countries may choose to build better ties with Beijing, partly through its Belt-and-Road Initiative, in response to greater economic policy uncertainty in Washington. Although the U.S. and China may inadvertently stumble into the proverbial Thucydides trap, we believe the best likelihood of military threats between these dual superpowers remains quite low. Over the past decade, President Trump has not shown any deep and extreme ideological inclinations. It does not seem likely for the current competition between the U.S. and China to further escalate into a more destructive New Cold War. Although President Trump sees more realism in the current balance of power between the U.S. and China, he strives to stop-and-prevent wars in the hot and lofty pursuit of world peace. In recent years, President Trump has reiterated his intentions to coordinate truces, ceasefires, and peaceful resolutions of the relentless Russia-Ukraine war in Eastern Europe, as well as the current conflicts between Israel and Iran, Lebanon, Hamas, and the Palestinians in the Middle East. The new Trump administration seeks to better contain China, its recent rise on the global stage of economic growth, and endless interference over Taiwan along the Pacific first island chain.

 

China rises to the new challenges ahead as President Trump moves into his second term.

Beijing believes Trump’s presidential election victory has little or minimal influence over the near-term trajectory of U.S. foreign policies toward China. In U.S. Congress, the bipartisan consensus perceives China as a unique series of new economic, technological, military, and diplomatic threats to the U.S. and its western allies, regardless of who wins the presidential bid to enter the White House. To the extent that the U.S. seeks to further contain-and-derisk from China, Russia, Iran, and North Korea, geopolitical alignment reshapes and reinforces asset market fragmentation in the broader context of financial deglobalization. Through U.S. political history, not everything remains the same from one administration to another. During his second term, President Trump is likely to maintain the hardline approach to foreign affairs with China not only from his own first term, but also from the Biden administration. President Trump seems to have learned from his first term that the current hardline approach to China would need to refresh with new and much younger cabinet members, such as Secretary of State Marco Rubio and Secretary of Defense Peter Hegseth, both of whom serve as China hawks with strong anti-communist beliefs. The devil is in the details. President Trump needs more nuance in the new bilateral relations between the U.S. and China. This nuance directs President Trump’s nominations for foreign policy and national security positions away from right-wing extremists (who served in their rightful capacity in the first Trump administration). In support of calm and stable asset markets, President Trump picks new cabinet members as strategic partners who can help advise on a wide range of global economic, technological, military, and diplomatic themes and issues during the recent rise of China, Russia, Iran, and North Korea on the global stage. Many of the new cabinet members continue to view China as the primary threat to the U.S. with substantial economic and technological advancements. For this reason, these cabinet members tend to favor new hardline and coercive measures for the new Trump administration to constrain China’s sphere of influence. Unlike the former Soviet Union in the Cold War era, China retains virtually no or few global ambitions to expand its communist propaganda. Nonetheless, the Trump administration needs to remain careful and cautious toward China’s increasingly aggressive policy stances toward Taiwan, Japan, Hong Kong, South Korea, and other strategic partners in East Asia.

 

In the wider geopolitical context, the same hardline approach may not work well because so much has changed significantly since the first Trump administration. When President Trump entered the White House for the first time in early-2017, many governments thought Trump would serve like a conventional American leader, an ideologically neutral businessman, and an economically rational decision-maker. Indeed, many major western allies thought Trump would commit to their common prosperity and regional security worldwide. President Trump visited China, Vietnam, South Korea, and the Philippines in November 2017. Despite U.S. opposition to Russia’s annexation of Crimea from Ukraine back in 2014, the Kremlin invited President Trump to Moscow for Russia’s annual celebration of the victory in World War II in late-2017. Subsequently, President Trump met with Russian President Vladimir Putin in a summit in Helsinki, Finland, as part of a weeklong trip to Europe in July 2018.

 

This time may be a bit different. Many leaders and governments are now proactive to protect their own countries from substantial economic policy uncertainty in Washington as President Trump moves into his second term. French President Emmanuel Macron invited President Trump to visit Paris as Macron would like to indicate that Europeans are their own decision-makers with respect to their own common prosperity, security, and climate risk management. Also, Japan and Germany reiterate their current concern that President Trump may require bigger fractions of their respective fiscal budgets to guarantee American military protection in their countries. In South Korea, the interim government worries that President Trump may take advantage of its current lack of authority over domestic affairs to the detriment of many special interest groups. In Taiwan, the extant government further fears that President Trump may tap into more than 5% of its annual economic output in return for U.S. military presence in response to China’s constant aggression.

 

In Eastern Europe, President Trump needs to grapple with the fact that Russia continues to attack Ukraine even though the U.S. and its western allies provide military support to Kiev. In the Middle East, Washington continues to provide military aid and geopolitical support for Israel’s brutal and bloody operations in Gaza, where many mainstream pundits believe there is an ongoing humanitarian crisis. Specifically, this crisis has further exposed the hypocrisy of U.S. claims to champion international law, world peace, and human rights. In his second term, President Trump has to better coordinate truces, ceasefires, and peaceful resolutions of these regional wars and conflicts in the lofty pursuit of world peace. Indeed, these peaceful resolutions can be a good legacy for President Trump to leave behind in his second term.

 

Since the first Trump administration, Beijing has become more adept at managing its current competition with Washington. We can trace this competition to the Obama administration in 2010 when President Obama embarked on a strategic pivot to Asia. In the subsequent years, Beijing has successfully navigated the different foreign-policy strategies and paradigms of the Obama, Trump, and Biden administrations. Both Biden and Obama attempted to contain China through multilateral negotiations, engagements, and approaches, while Trump took a more unilateral foreign policy stance toward China. With a decade-long experience, Chinese leaders remain calm, careful, and cautious toward the same well-known prospect of a Trump second term. On some of its official government agency websites, Beijing has even released strategic guidelines on how their leaders, technocrats, and diplomats can handle President Trump’s harsh foreign-policy measures against China. The Xi administration adheres to the current commitment to mutual respect, peaceful co-existence, and win-win cooperation as the mainstream principles for China-U.S. relations in trade, finance, and technology. Mutual respect refers to the worst-case scenario where China may retaliate by offloading more than $750 billion massive stockpiles of U.S. government bonds against any provocative foreign-policy measures, export restrictions, tariffs, quotas, embargoes, and several other economic sanctions that the new Trump administration chooses to undertake against China. Peaceful co-existence reflects the fact that China seeks to engage President Trump and his reps in new mutual dialogues to better manage expectations, differences, and even conflicts. In this fashion, the ultimate peaceful resolutions would help stabilize China-U.S. relations. Win-win cooperation refers to joint collaboration on global themes and issues in which China and the U.S. share common interests. In the meantime, these global themes and issues include the peaceful resolutions of wars and conflicts in Eastern Europe and the Middle East, as well as bilateral rules and regulations for artificial intelligence infrastructure, semiconductor micro-chip design, and the worldwide flow of illicit drugs (specifically, fentanyl and ketamine).

 

Chinese leaders should learn to better manage potential economic conflicts and clashes in the current trade war with America, while many other western countries hedge their foreign investment bets outside North America.

President Trump seems intent on further entrenching U.S. domestic economic protectionism in his second term, especially when this hardline foreign policy stance involves bilateral trade with China. President Trump has indicated that he might levy higher tariffs on Chinese goods. Also, the Trump administration seeks to impose more draconian restrictions on U.S. foreign direct investments (FDI) in China as well as on Chinese capital in the U.S. stock market. In addition, the Trump administration plans to place more constraints on China-U.S. high-tech collaboration with substantially fewer Chinese students and H1-B workers in the U.S. across STEM subjects. These decisions may inadvertently result in greater frictions between Beijing and Washington. Although the Biden administration extended the tariffs that Trump imposed on Chinese goods in his first term, this extension focused on excluding China from the global supply chains for intermediate technological goods, such as semiconductor microchips and high-speed broadband networks etc. Specifically, the Biden administration sought to de-risk from China, but did not seek to completely decouple from China. Throughout Biden’s tenure, key traditional trade sectors between China and America continued business-as-usual even though their technological collaboration came to a halt. In his second term, President Trump is likely to push harder for further decoupling from China. His new industrial homeland policy stance toward China may dramatically reduce the total market share of Chinese products in America. This reduction spans intermediate goods made and built outside China; however, their lean production still relies heavily on Chinese investments, factories, components, and other industrial resources. At the same time, Beijing may retaliate by offloading at least some of the $750 billion massive stockpiles of U.S. government bonds, as well as $2 trillion dollar assets, against any provocative foreign-policy measures, export restrictions, tariffs, quotas, embargoes, and some other economic sanctions that the new Trump administration deploys against China. This tit-for-tac dynamism may drive the China-U.S. trade war to a new peak. As a consequence, the global economy would suffer with new scars and damages as many other countries scramble to implement their own protectionist policies in global trade, finance, and technology.

 

As President Trump escalates the trade war against China, his administration seeks to ramp up military pressure on Beijing along the Pacific first island chain. The Trump administration is likely to build strategic partnerships with Japan, South Korea, Taiwan, and the Philippines in response to any aggression from China. However, President Trump has often turned to short-run tactics to bully-and-bluff his adversaries at home and abroad. Before the U.S. and North Korea reached a truce as part of the dual summit in June 2018, President Trump often threatened to attack North Korea with fire and fury as Pyongyang tested mid-range missiles at the early stage of his first term. In recent years, President Trump further often threatened to impose additional tariffs and other economic sanctions on China, Russia, Iran, and even Canada and Mexico. In the meantime, President Trump seems to have learned from his first term that the current hardline approach to China would need to refresh with new and younger cabinet members, such as Secretary of State Marco Rubio and Secretary of Defense Peter Hegseth, both of whom serve as China hawks with strong anti-communist beliefs. Because the Republican Party holds majority seats in both Senate and the House of Representatives, the Congress may encourage President Trump’s tendency to bully-and-bluff again when the U.S. seeks to address military tensions with Beijing. These military tensions involve maritime issues around Vietnam and the Philippines in the South China Sea, sovereignty issues over Senkaku islands with Japan, and potential conflicts about Taiwan. Through both bellicose rhetoric and impulsive actions, President Trump might provoke unnecessary political crises. A similar situation happened when Nancy Pelosi, then Speaker of the House, visited Taiwan in 2022, and as a result, China responded to American provocation by stepping up its military activities and maritime war games around the Taiwan Strait. In his second term, President Trump might end up sparking similar incidents and resultant spikes in tensions and frictions between the U.S. and China.

 

Trump’s return to the White House seems likely to trigger a chilling effect on official dialogues, engagements, and frictions between Beijing and Washington. More than 15 years ago, there were more than 90 diplomatic channels for communication between the U.S. and Chinese governments. By the end of President Trump’s first term, there were none. President Trump seeks to suspend more than 20 diplomatic channels for communication with China that the Biden administration reinstated in the past 4 years. President Trump may replace the extant diplomatic channels with new alternative channels, arrangements, and mechanisms under his direct oversight (rather than through high-ranking bureaucrats). In response, China may remain cautious when its diplomats and bureaucrats reach out to the Trump administration. President Trump’s visit to Beijing in November 2017 led to a precipitous decline in bilateral relations in the next month when Washington denied China’s status as a developing country in the World Trade Organization (WTO). In China, President Xi and his delegates should still remember this unpleasant experience.

 

While the U.S. and Chinese governments may continue to rattle sabers in global trade affairs, bilateral animosity can grow at the societal level. Populism continues to gain strength in both countries. In some parts of these countries, the recent clashes fan the flames of jingoism. If the new Trump administration threatens China with additional tariffs, export restrictions, and other economic sanctions, the resultant geopolitical tensions can inevitably heighten hostility between their respective peoples. Both American populists and Chinese populists attribute the root cause of their domestic problems to foreign malevolence. It would be convenient for both the U.S. and Chinese leaders to shift blame to some outside agent. In the modern age of social media, radical netizens and online influencers can exacerbate geopolitical tensions between the U.S. and China through jingoist propaganda. It may become more difficult for both governments to improve China-U.S. relations as social and cultural clashes keep the 2 great powers at loggerheads.

 

In addition to economic sanctions, the new Trump administration may take a chance to rattle sabers with China through new military activities and war games along the Pacific first island chain from Japan and South Korea to Taiwan and the Philippines.

President Trump’s second term may create new geopolitical tensions between the U.S. and China as he attempts to use economic and military levers to contain China. In practice, the new Trump presidency can benefit China in several ways. First, President Trump has no or little interest in ideological issues, this disinterest may soften some of the edges of the rivalry with Beijing. President Trump often seems to fixate on the bottom line, so he has never tried to champion human rights worldwide. Further, it is not in his best interest to reshape China’s political system to conform to the western democratic systems. For this reason, President Trump does not seek to intervene in China’s domestic affairs. Unlike the former Soviet Union, China has no global ambitions to spread its communist ideology elsewhere around the world. The Chinese Communist Party (CCP) continues to focus on fixing domestic economic woes and maintaining regional peace and prosperity in East Asia. Although economic and political conflicts may deepen between Beijing and Washington in President Trump’s second term, these conflicts are not likely to escalate into an ideological New Cold War.

 

President Trump seeks to reduce its military investments abroad in protecting western allies. Indeed, President Trump has long berated many western allies for riding on the coattails of American hard power, military presence, and protection. These complaints may further drive European and East Asian allies to view the merits of hedging between China and America. In particular, Singapore, South Korea, and Taiwan have long adopted the clever strategy of hedging between the 2 great powers. For many years, these East Asian states leaned into their close economic ties with China. At the same time, these East Asian states further relied on the U.S. for regional security. From France, Germany, and the U.K. to Japan and ASEAN member states, many other countries might follow suit to hedge between the U.S. and China.

 

China continues to pose new economic, technological, and military threats to the U.S. and its western allies.

In the U.S. government assessment, China poses new economic, technological, and military threats to the U.S. and its western allies. As China vies to surpass the U.S. in comprehensive national power, the middle kingdom seeks to combine whole-of-government efforts to secure deference to its own preferences from its East Asian neighbors such as Japan, South Korea, Vietnam, and the Philippines. President Xi Jinping envisions China as the preeminent power in East Asia and further as a new superpower on the world stage. The Chinese Communist Party (CCP) often preempts challenges to its reputation and legitimacy, undercuts American influence, drives wedges between Washington and western trade partners, and forms new global norms in better alignment with the CCP’s authoritarian system. Most significantly, the People’s Republic of China (PRC) continues to press Taiwan on reunification. This particular effort creates critical frictions with the U.S. and many western countries. Despite the recent economic setbacks in the property sector, China’s leaders maintain statist economic policies to steer capital toward some high-tech sectors. This statist approach can help China reduce reliance on foreign technology for better military modernization.

China views Washington’s competitive measures against Beijing as part of U.S. diplomatic, economic, military, and technological efforts to contain the recent rise of the middle kingdom. This broader approach helps the U.S. government undermine the CCP’s authoritarian rule, and then further prevents the PRC from achieving its global power ambitions. Nevertheless, China’s leaders now seek opportunities to avoid geopolitical tensions with Washington when these leaders believe the broader economic policies protect the core interests of Beijing.

Many CCP leaders have long believed that China’s high-tech-driven economic growth would outpace the U.S. and many other western countries. Also, China continues to compete with the U.S. and western allies on the economic and technological fronts, from trade and finance to semiconductor microchip production and high-speed 5G broadband Internet connectivity. However, China’s economic growth almost certainly continues to slow down due to massive demographic changes and recent declines in both consumer and investor sentiments in light of the hardline economic policies from Beijing.

In addition to its domestic challenges, China’s coercive hardline economic, diplomatic, and military tactics toward Taiwan and most other East Asian countries further hamper the global power ambitions of PRC leaders. Specifically, China’s own economic reforms have led many countries and multinational corporations to accelerate decoupling-and-de-risking from some key sectors. This acceleration further helps restrict exports of sensitive technology to China. In addition to the Trump tariffs on Chinese imports, the Biden administration further imposes restrictions on the potential unlawful transfer of high technology in semiconductor microchips, quantum sciences, high-speed 5G broadband telecoms, and global defense applications.

The PRC seeks to integrate its economic might with its growing military power and diplomatic and technological dominance for better coordination to strengthen the CCP’s current rule of man. In this broader context, the PRC further attempts to secure what it regards as its own sovereign territory (such as Taiwan, Diaoyu, and Spratly Islands). In East Asia, China often makes diplomatic and economic efforts to project regional influence and preeminence in the lofty pursuit of global power. Beijing specifically applies these whole-of-government tools to compel Asian neighbors to acquiesce to its own preferences; and these preferences include Beijing’s long prevalent assertions of sovereignty over Taiwan.

After Taiwan’s presidential election in early-2024, Beijing continues to apply both economic and military pressures to reinforce the propaganda that Taiwan has been historically part of China. The PRC’s recent economic reforms help promote longer-term cross-strait economic and social integration to induce Taiwan to move toward reunification. Taiwan is a significant potential flashpoint for confrontation between China and the U.S. as Beijing claims that the U.S. uses Taiwan’s technological, economic, and democratic assets to undermine the recent rise of China. In the worst-case scenario, Beijing would use even stronger measures to push back against the perceivable increases in U.S. support to Taiwan.

In the South China Sea, Beijing continues to leverage its growing military and other maritime capabilities to try to intimidate rival claimants (primarily from Vietnam and the Philippines). In recent years, Beijing seems intent to signal that China has control over many contestable waters. In a similar vein, China continues to press Japan over Diaoyu and other contestable islands in the East China Sea.

Beijing aims to expand its sphere of influence abroad. The CCP leaders project China to be a champion of global development through many multinational forums and PRC initiatives. These initiatives include the recent Belt and Road Initiative for building infrastructure in Asian and African countries; the Regional Comprehensive Economic Partnership (RCEP) for freer trade; the Global Development Initiative for climate-driven economic growth; and the Global Security Initiative for better cross-country conflict resolution. Further, China promotes a key alternative to the extant American-led international development and security forums in favor of Chinese norms, which support state sovereignty and place political stability over individual human rights. As part of this broad toolkit, Beijing seeks to champion economic development and security in the global south because China shares with Asian neighbors many historical experiences under colonial oppression. In this unique fashion, Beijing builds global influence, demonstrates Chinese leadership, and expands its own troika of economic, diplomatic, and military levers.

 

Nowadays, China poses new economic, technological, military, and diplomatic threats to the U.S. and its western allies.

https://ayafintech.network/blog/china-poses-new-economic-technological-and-military-threats-to-the-us-and-western-allies/

 

The U.S. further derisks and decouples from China.

https://ayafintech.network/blog/the-us-further-derisks-and-decouples-from-china/

 

China Internet rivals continue to enjoy global reach, business model monetization, and new improvements in sales and profits amid greater competition.

https://ayafintech.network/blog/stock-synopsis-china-internet-companies-continue-to-enjoy-global-reach-business-model-monetization-and-new-improvements-in-sales-and-profits/

 

Geopolitical alignment reshapes and reinforces asset market fragmentation in the broader context of financial deglobalization.

https://ayafintech.network/blog/geopolitical-alignment-often-reshapes-and-reinforces-asset-market-fragmentation-in-the-broader-context-of-financial-deglobalization/

 

Can the Chinese renminbi arise as a new global reserve currency in addition to the American dollar?

https://ayafintech.network/blog/chinese-renminbi-becomes-the-next-global-reserve-currency-in-addition-to-the-american-dollar/ 

 

 

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