THE U.S.-CHINA TRADE BATTLE COULD GET UGLY — FAST.
Canada is in a solid position, because of its robust imports of U. S. manufactured goods, to fend off the waves of protectionism now beginning to ripple outward from President Donald Trump’s White House.
The same can’t be said for the follow- on effects of looming U. S. trade actions against Mexico and China, which round out the list of America’s top three goods trading partners, alongside Canada.
Mexico, judging from recent signals emanating from the Trump administration, promises to be a pre- dinner snack on protectionist America’s plate. China is the main course. The president’s executive order withdrawing the United States from the Trans Pacific Partnership trade agreement, far from pulling America back from the Pacific region, sets the stage for an old-fashioned superpower standoff there.
Long before the TPP (which had comprised Australia, New Zealand, Japan, Singapore, Malaysia, Vietnam, Brunei, Chile, Mexico and Peru, Canada and the United States) ran afoul of right-wing nativists and left- wing populists in the United States, it was an Obama administration strategy for containing the increasingly impatient regional muscle- flexing of Communist China.
The strategy’s most fervent advocates were the Japanese, led by Prime Minister Shinzo Abe. Taiwan was not invited to join TPP, doubtless because of the furious backlash this would have provoked from Beijing. Nevertheless the Taiwanese, led by President Tsai Ing- wen, had welcomed the pact because of the renewal of U. S. regional security guarantees it represented.
This is why, when Trump and Democratic party insurgent Bernie Sanders began looming large a year ago, both attacking the TPP, opinion leaders in Japan and Taiwan began feverishly speculating about the future of U. S. engagement in Asia.
The U.S. Navy is the guarantor of last resort for international law and international shipping through the South China Sea, worth an estimated US$5-trillion annually. China is attempting to assert a claim over much of that open ocean, contained by its so- called nine- dash line, as well as a group of small islets in the East China Sea in Japan’s Okinawa Prefecture.
Chinese incursions into territory long claimed by its neighbours have become commonplace in recent years, causing Japan to re- garrison its farthest- flung islands. Regional nerves have been further frayed by the People’s Liberation Army’s rapid building of various regional shoals and reefs into what appear to be air strips and fuel depots.
During his campaign for the Republican nomination, adding to his barrage against the TPP, Trump asserted key Pacific allies such as Japan and South Korea weren’t pulling their weight and should be made to pay for protection, or do it themselves. The ensuing received wisdom has been that, under Trump, the U.S. would beat a gradual retreat from the Pacific, leaving a clear field for China to continue to grow its influence.
The missing piece in this assumption was trade — a fact made increasingly obvious as Trump cabinet nominees led by Defence Secretary James Mattis and Secretary of State Rex Tillerson have appeared before Congress. The president’s inaugural speech confirmed it.
The administration’s self-stated sine qua non is the resurrection of American manufacturing, which it hopes to bring about by reversing a significant goods trade deficit with Mexico, nearly $60-billion in 2015, and a massive goods trade deficit with China, $366-billion in 2015.
China’s export- driven economy has long relied heavily on access to the U.S. market for steady, rapid growth. But that expansion, formerly in double digits, has slowed in recent years as the Chinese economy matures. This slowdown, which seems irreversible, has been posited by some analysts as the underlying reason for President Xi Jinping’s heavy- handed assertion of control over all aspects of the Chinese state — and Beijing’s new restlessness with regional limitations on its influence. Any dramatic curb in Chinese exports to the United States is likely to exacerbate such pressures.
Ergo, all the signals coming from senior Trump administration officials — from the president himself, with his Taiwan- friendly Tweets, on down — are not of waning interest in the Pacific region, but waxing. Only rather than the softish power of multilateral trade ties, the primary instrument of American power projection will be military — aircraft carriers and nuclear deterrence.
Answering questions f rom journalists in Washington, D. C., Monday, White House press secretary Sean Spicer said “we’re going to make sure we defend international territories,” echoing earlier remarks by Tillerson. Beijing responded Tuesday by saying its claims in the South China Sea are “irrefutable,” just as it has insisted that its claim to Taiwan, which it considers a wayward province, is non-negotiable.
The Trump administration’s first foreign policy statement, meantime, reads as follows: “Our Navy has shrunk from more than 500 ships in 1991 to 275 in 2016. Our Air Force is roughly one-third smaller than in 1991. President Trump is committed to reversing this trend, because he knows that our military dominance must be unquestioned.”
It boils down to this: Two superpowers possessed of the world’s largest economies, both nucleararmed, and one of which is Canada’s immediate neighbour and closest partner, are about to clash — economically and strategically — as never before. Batten the hatches.