U.S. allies must prepare for an administration that views almost any tie to China as a source of vulnerability.
A worker checks a rotor core used for wind turbines at a factory in Nantong, China, on Sept. 20, 2023. STR/AFP via Getty Images
With only a few weeks left in office, U.S. President Joe Biden’s administration recently launched new export bans designed to hit China’s semiconductor industry. In return, Beijing announced restrictions on critical mineral exports to the United States. These latest measures fit a pattern under the Biden administration of using narrowly targeted measures to contain China’s growing technological prowess. As President-elect Donald Trump prepares to take office in January, however, U.S. restrictions on China are likely to become far more dramatic.
The Biden administration’s approach to selectively cut economic ties to China masks a division within the West that Trump’s election victory will surely deepen. Over recent years, Washington’s closest geopolitical partners were able to labor under a happy delusion regarding their relations with China. Full economic and technological decoupling between China and the West was deemed impossible and even undesirable. Much of the policy focus was on reducing specific, narrow risks of dependency on and coercion by Beijing. To signal consensus and paper over their differences over the extent of separation, Western diplomats, including those in the United States, duly began talking about de-risking rather than decoupling.
Trump’s return to the White House makes it clear that this unity was a mirage. The United States is now promising a much more profound separation from China—potentially even decoupling in full.
This presents significant dilemmas for Washington’s partners. Trump will pressure them to follow his decoupling lead when few have an interest in doing so. So far, most European nations have failed to take more than a few small steps to de-risk from China. Some, such as Britain and Germany, have even begun a process of “re-risking” by looking to deepen diplomatic and economic ties with Beijing. East Asian allies like Japan and South Korea take de-risking more seriously. But even here, the realities of trade and geography make a more dramatic form of separation highly problematic.
In Trump’s mind, the most obvious route to full decoupling remains trade policy. Recent appointments clearly show the direction he plans to take. Trade attorney Jamieson Greer, Trump’s announced pick to be the next U.S. trade representative, specifically called for an intensified process of “strategic decoupling” earlier this year. A protégé of Robert Lighthizer, who was trade representative during Trump’s first term, Greer will now push forward with an array of tough new tariffs and export controls. In this sense, the second Trump administration will be quite different from the first, which focused much more narrowly—and ultimately unsuccessfully—on using tariffs to reduce the United States’ bilateral trade deficit with China.
That said, tariffs will once again be Trump’s favored tool. During the election campaign, he threatened Chinese products with levies as high as 60 percent. In November, he pledged an additional 10 percent to punish Beijing for failing to stop its fentanyl exports. Some of these threats might turn out to be negotiating ploys. But it seems clear that Trump’s team is planning substantial new trade measures. If we take him at his word, a 60 percent tariff on U.S. imports of Chinese products would be enough to drive U.S.-China trade close to zero, according to calculations by Tom Orlik, chief economist at Bloomberg.
New measures pushing separation are likely as soon as Trump takes office. One will be the announcement of a state of economic emergency, a legal ploy allowing the administration to unilaterally change tariffs. Further measures are sure to follow under Section 301 of the 1974 Trade Act, which grants the U.S. trade representative broad powers to respond to alleged unfair trade practices. Trump favored this tariff tool during his original trade war with China, which took place from 2018 to 2020, and is sure to use it again, said Hinrich Foundation trade expert Deborah Elms.
Even tariffs set below 60 percent would have a substantial decoupling effect. The barriers put up during Trump’s first term sharply reduced Chinese exports. Biden’s tenure then saw U.S. dependence on Chinese manufactured goods fall further. This year, Mexico overtook China to become the United States’ leading provider of imported goods for the first time in decades.
There are, of course, good reasons to doubt the wisdom of this approach. High tariffs will damage the U.S. economy by stoking inflation. They will cause international contagion, too, as other nations respond with tariffs of their own. There will be substantial second-order effects, for instance, as China redirects its vast export overcapacity to economies in Europe, the global south, and elsewhere, or craftily shifts production to third countries to avoid U.S. tariffs. Some nations are already moving to avoid U.S. criticism that they act as bases for Chinese firms to dodge U.S. tariffs, as Malaysia did this week.
Trump’s team seems happy to take these risks, however, viewing them as a price worth paying to reshore and rebuild U.S, manufacturing capabilities and reduce dependency on China. “In some cases, the effort to pursue strategic decoupling from China will cause short-term pain,” Greer said at a U.S. congressional hearing in May. “The cost of doing nothing or underestimating the threat posed by China is far greater.”
These economic measures will be supported with enthusiasm by Trump’s new national security team, which is readying new measures that target China’s burgeoning technology sector. The recent restrictions on semiconductor exports will likely be followed by others targeting areas like biotechnology and quantum computing once Trump takes office. The intention to decouple in as many strategically significant technologies as possible is clear enough. “Washington should, in fact, seek to decouple its economy from China’s,” Robert O’Brien, Trump’s former national security advisor wrote in June.
The Fiction of Western Unity on China De-Risking
U.S. allies must prepare for an administration that views almost any tie to China as a source of vulnerability.
foreignpolicy.com
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