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Trump President: What's in It for China?

Much of the world is in shock over the recent election of billionaire property developer and TV reality shows mogul Donald J. Trump in the United States.

Much of the world, China included, is in shock over the recent election of billionaire property developer and TV reality shows mogul Donald J. Trump in the United States.  All of the pre-election polls, and even many of the leaders of Mr. Trump’s own Republican Party themselves, had written him off going into this past Tuesday’s U.S. presidential elections.  Yet as the returns came in, the stunning upset that is now a reality became clearer: Donald J. Trump will be the next President of the United States.  This brings up a whole host of questions related to the United States’ future relationship with China, particularly as it relates to economic and diplomatic ties between the two countries.  Mr. Trump made economic protectionism a central portion of his platform and exit polling showed that his largest base of support were white blue-collar workers, many of whose jobs had been displaced when the factories at which they were employed moved overseas, many times to China.  While on the campaign trail, Mr. Trump threatened to slap tariffs of up to 45 percent on imports from China.  He also vowed to pursue protectionist policies such as re-negotiating the North American Free Trade Agreement (NAFTA) and he has also slammed global trade deals like the proposed Transpacific Partnership (TPP).  Many analysts expect the United States under President Trump to be more isolationist and have predicted a possible trade war between the United States and China.  Nonetheless, it is truly impossible to predict the outcome of a Trump presidency on U.S.-China relations until Mr. Trump actually takes up residence in the White House.

 

Reactions to Mr. Trump’s Election in China

As in much of the rest of the world, the news was met with much shock on the streets and in offices and boardrooms throughout most of China when it was announced Mr. Trump had won the United States presidency.  Although President Xi Jinping of China reportedly called to congratulate Mr. Trump on his election, serious questions remain as to whether, and how, the Trump presidency will affect the United States-China relationship.   While many U.S. journalists were critical of Mr. Trump, many ordinary Chinese citizens watched the contest between Mr. Trump and Hillary Clinton with a mixture of interest and bemusement.

 

The Effects of a Trump Presidency on the U.S.-China Economic Relationship

From an economic perspective, on the campaign trail Mr. Trump repeatedly emphasized that he intends to impose steep tariffs on imports from China, which could certainly affect the economic relationship between the two countries.  Many experts note that, despite his rhetoric on the campaign trail, Mr. Trump likely will not be nearly the protectionist he has made himself out to be. For example, a recent analysis by the New York Times noted that Trump could use trade as a weapon and suggested the United States has more leverage than China when it comes to any trade war which could escalate during a Trump presidency.  In support of this conclusion, the Times noted that because China imports more from the United States than it exports to the United States, China’s options may be limited if President Trump were to impose tariffs on certain Chinese imports.  Certainly, China could file a case with the World Trade Organization, but a number of such cases have already been filed against China by the Obama administration.

Nevertheless, Mr. Trump’s ability to impose tariffs on China or take other measures in pursuit of any trade war would be limited by existing U.S. law.  For instance, U.S. Presidents have limited ability to impose any tariff they want.  Instead, a President is permitted under existing U.S. law to only impose tariffs of up to 15 percent on all imports from any one nation, and then only for a period of up to 150 days, absent a state of emergency being declared by the U.S. Congress.  Other laws permit higher tariffs on certain types of goods, but President-elect Trump’s ability to impose an across the board 45 percent tariff on all Chinese goods is very limited.  Instead, to the extent he does actually imposed tariffs on Chinese imports, he is likely to do so in specific industries or at lower rates than the 45 percent he promised on the campaign trail.

Another concern could be the potential restrictions on Chinese investments in the United States.  This would result in fewer U.S. jobs, as Chinese companies have been active in acquiring companies and making investments in the United States.  Indeed, nowhere this is more true than in the area of America’s crumbling infrastructure, which Mr. Trump has pledged to modernize with a massive infusion of cash.  One need only look at the example of the $60 million invested by China’s largest rail manufacturing company made in a new plant in Springfield, Massachusetts to manufacture new cars for the Boston subway system.

 

The Effect of a Trump Presidency on the U.S.-China Diplomatic Relationship

            Certainly, the effects of a Trump presidency economically on the U.S.-China relationship will to a large extent determine what type of diplomatic relationship the two countries will enjoy during his presidency.  If Mr. Trump stays true to his campaign promises to slap heavy tariffs on Chinese goods, then the relationship likely will suffer.  Nevertheless, the United States and China are interdependent upon each other as the first and second largest economies in the world.  The United States and China’s relationship is constrained by the fact that they simply need each other due to the size of each country’s respective economy as a market for the other’s goods.  In addition, President-elect Trump has vowed to pull back from President Obama’s strategic pivot towards Asia.  This could increase the room for China to maneuver in its own backyard, thereby decreasing the tension which has been caused by America’s increasing assertiveness in the South China Sea.  By the same token, the diplomatic relationship between the two most powerful countries in the world will largely depend on what policies a Trump administration actually puts into place once Mr. Trump has been sworn in.

 

Conclusion

            As is the case with much about the upcoming Trump presidency, it remains to be seen what effect his election to the United States Presidency will have on U.S.-China relations, both from an economic as well as a diplomatic perspective.  As Mr. Trump was very thin on concrete policy proposals (a fact for which he was heavily criticized by the American news media) during the campaign other than to say that he would impose steep tariffs on Chinese imports into the U.S., no one is quite sure what he will do once he is seated in the Oval Office.  Nonetheless, his ability to do as he has promised is constrained to a significant degree by U.S. law.  Much remains to be seen about what effect a Trump presidency will have on U.S.-China relations both economically and diplomatically.  Either way, it will certainly shake up the relationship between the two countries.  Whether for better or for worse remains to be seen.

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Posted by Téo Doremus 2017-01-23 16:24:58 Facebook LinkedIn Twitter Comodo SSL