Trump’s Trade Threats Put China’s Leader on the Spot
Posted March 22, 2018 3:39 p.m. EDT
BEIJING — For the better part of two decades, China’s leaders have made the most of the global trade rules set by the United States and others, seizing on opportunities to bolster their nation’s economic rise while finessing American complaints that they were not always playing fair.
Now, for the first time, China faces an American president who is embracing protectionist measures, and that has presented its leader, Xi Jinping, with an extraordinary challenge: Even as he has elevated his status as the country’s “helmsman,” with a new mandate to rule indefinitely, the United States is moving to treat China more seriously as a strategic rival and to recast an economic relationship that has long bound the two countries.
The punitive actions unveiled by President Donald Trump on Thursday — about $60 billion in tariffs a year and other penalties targeting Chinese goods, as well as new restrictions on Chinese investment in the United States — will put Xi on the spot, forcing him to consider retaliatory action that could send a shudder through the global economy and complicate his efforts to sustain China’s rapid growth in the face of rising debt and an aging population.
Chinese leaders are judged in part on how they manage relations with the United States, and a damaging trade war, if handled poorly, might diminish Xi’s political standing and test the wisdom of the highly centralized power structure that he has erected around himself. If he retreats and offers significant concessions, however, Xi risks looking weak and inviting criticism in a political system that has fanned nationalist and anti-American sentiment.
Shi Yinhong, a professor of international relations at Renmin University in Beijing, said that Chinese leaders had been so successful over the years in deflecting criticism of the country’s trade practices in the United States that they may have been slow to realize the gravity of the confrontation brewing.
“People in the U.S. and China have for years said the wolf is coming, the wolf is coming, but the wolf hasn’t come,” he said. “This time, the wolf is coming. And how to deal with the wolf? I would say that there is still no consensus.” Analysts in Washington and Beijing say that Xi will want to demonstrate resolve by standing up to Trump while finding a way to steer the two countries away from a broader confrontation that could slow China’s rise and undermine its global ambitions.
“Xi’s done an excellent job walking the thin line between Trump’s aggressive rhetoric and protecting his own strong nationalist image,” said Cliff Kupchan, chairman of Eurasia Group, a consultancy in Washington.
Referring to Xi and his advisers, he added: “The question has always been how skilled are these guys as policymakers. Now they are going to be tested. Can the ‘helmsman’ pull with both oars?”
Trump’s determination to carry out pledges from his presidential campaign — in which he repeatedly accused China of “raping” the United States and its workers — has frustrated Xi’s team. They must now decide how to respond to a mercurial American president who heaps praise on Xi personally even as he rails against a trade relationship that they argue has benefited both nations — a view endorsed by Trump’s predecessors and, until recently, by much of the American business establishment.
A major reason for Xi’s frustration, analysts said, is that Beijing feels it has already made concessions to Trump by tightening sanctions against North Korea over its nuclear program, and at considerable cost to Chinese companies. Chinese officials had assumed that would keep Trump from following through on his trade threats, as he had suggested more than once.
When it became clear this year that cooperation on North Korea would not be enough to placate trade hawks in the Trump administration, Xi redoubled efforts to head off the tariffs, dispatching his senior economic adviser, Liu He, to Washington last month.
That mission ended, however, in a humiliating snub. Though Liu was acting as Xi’s personal envoy, Trump declined to meet him. Instead, the White House announced tariffs on steel and aluminum imports, including from China, on the first day of his visit. In another sign of Xi’s trust in him, Liu was promoted last week to vice premier overseeing the economy.
Michael Pillsbury, director of the Center for Chinese Strategy at the Hudson Institute in Washington, said Xi had turned to respected veterans of diplomacy with the United States by elevating Liu, who studied at Seton Hall and Harvard, and Wang Qishan, the new vice president, who has long-standing ties with Wall Street.
He noted, however, that they had become Xi’s point men on the relationship at a moment when their experience may be a poor guide to Washington, just as two decades of bipartisan American support for deeper trade with China is crumbling in favor of a more protectionist, “America First” approach.
“They’re having a hard time adjusting to the new owners,” said Pillsbury, who served as an adviser to the Trump campaign.
China has warned that it will retaliate, tit-for-tat, against tariffs and other measures. Even before the announcement of punitive measures in Washington on Thursday, the Ministry of Commerce in Beijing issued a statement sharply criticizing the Trump administration.
“We firmly oppose the unilateralism and trade protectionism of the United States,” it said. “China will absolutely not sit back and watch as its legal rights and interests get hurt.”
Hu Xijin, the editor-in-chief of Global Times, a state newspaper with a nationalist bent, signaled that the government would begin by raising barriers to American agricultural products, practically taunting American soybean farmers. “Soybeans of Brazil, Argentina and Russia are good alternatives,” he wrote on Twitter.
He added that while a trade war would benefit no one, “China is far more resilient than the U.S. to the pain.”
In the past, the Chinese government has succeeded in blunting American complaints about its trade policies — and over the giant trade imbalance between the two countries — by enlisting the support of big business in the United States to head off calls for punitive measures while making relatively small concessions and dangling the prospect of further action.
In a news conference this week, Premier Li Keqiang struck a familiar, conciliatory tone, defending the global trading system and promising to take additional steps to open China’s economy to American services and products.
“What we hope is that cool heads and rational actions will prevail, instead of emotions or impulses holding sway,” he said.
Such words might have led to negotiations in the past, but Trump appears less interested in negotiations than the Chinese leadership is.
It is also unclear what exactly the Chinese government could do to mollify the Trump administration. Two people briefed on bilateral discussions said Chinese officials had asked for a to-do list they could work with, but the administration has not provided one.
Xi has made clear that he envisions China as a leading power on the world stage, able to dictate terms as the United States did for decades. And some of his supporters have argued that Trump’s policies — especially his willingness to break with long-standing allies in Asia on trade — have presented China with an opportunity to make great strides toward that goal. But a trade war that hurts the Chinese economy could slow Xi’s agenda and roil Chinese politics in unpredictable ways.
Pillsbury, the author of “The Hundred-Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower,” said there was a divide in the Chinese political establishment that mirrored the split in the United States between “globalists,” who favor trade and a rules-based international order, and “nationalists,” who argue that those things are sapping American strength.
In China, he argued, a major confrontation over trade would be likely to strengthen those who believe the United States is seeking to block China’s rise.
Hu Angang, an economist at the School of Public Policy and Management at Tsinghua University who advises the government, said that Trump’s decision could begin a vicious cycle that would hurt the United States’ reputation more than China’s economy.
“I think Trump is not professional; he doesn’t understand the global situation,” he said.
Hu added that China may be replacing the United States, with Xi picking up the banner of global cooperation on trade, climate and other issues that Trump’s predecessors had carried.
“After 40 years of being students, learning from our teacher,” he said, “now it is the time for the teacher to learn from its students.”