TRUMPING CHINA
From a brewing trade war to North Korea, Donald Trump is taking the battle to China
From a brewing trade war to North Korea, Donald Trump is taking the battle to China
When China announced on June 19, with little prior warning, that North Korean leader Kim Jong-un had already arrived in Beijing under a shroud of secrecy for an unexpected two-day visit, the news was striking on many levels. Kim’s armoured train was a topic of particular public fascination but more momeorable perhaps was the fact that it had taken the young dictator six years to make his first visit to China. His latest visit, however, would remarkably be his third in as many months, following an ‘informal’ seaside summit with Chinese president Xi Jinping in Dalian in May. The message from the three visits was clear: the old Communist allies were very much still, as Mao Zedong proclaimed to Kim’s grandfather, “as close as lips and teeth”.
Yet the very need for the two allies to reaffirm their ties points to the disruption below the surface. In truth, Beijing has been caught off-guard by United States President Donald Trump’s remarkable rapprochement with North Korea—meeting Kim in Singapore on June 12, only months after threatening to rain down “fire and fury” on him—and has been scrambling to keep up. The three quickly-arranged summits with Kim have, to a degree, enabled that precisely. Kim and Xi have appeared to closely align their views, and Chinese officials were left pleasantly surprised by Trump’s dramatic and unexpected offer to cease US-South Korea war games—long a headache for Beijing.
THE TRADE SPAT
And it isn’t only on North Korea that Trump has kept Beijing guessing. The mercurial US president had barely touched down in Washington before he fired a fresh salvo in China’s direction: signalling his readiness to move forward with 25 per cent tariff on up to $50 billion worth of Chinese imports that includes electrical machinery, transportation, base metals and chemicals. Beijing officials responded promptly, announcing their own 25 per cent tariff on 659 US goods worth $50 billion (including agricultural products such as soybean), taking the world’s two biggest economies a step closer to a looming trade war.
Trump has made it clear that he doesn’t plan to stop at these measures. On June 19, the American president said he had directed the US Trade Representative to identify a second round of 10 per cent tariffs on $200 billion worth of Chinese imports. He still wasn’t done. “If China increases its tariffs yet again,” Trump warned, “we will meet that action by pursuing additional tariffs on another $200 billion of goods”. This would bring the total to $450 billion, threateningly close to China’s overall exports of $500 billion to the US.
This has left Beijing with little room for manoeu-
vre, considering that the US exports to China are worth only around $130 billion. Given the huge surplus Beijing enjoys, it has more or less run out of US goods to retaliate on. All it can do now is target US companies based in China, but doing so will come at a great cost at a time when China still needs American technological expertise as it looks to upgrade its manufacturing sector. This is a battle that China cannot win easily.
GROWING RIVALRY
In a sense, the trade war is also inextricably linked to the unfolding events in North Korea. Ironically, months ago, it was North Korea that was driving the tensions between the US and China—specifically, Trump’s frustration that China was not doing enough to exert economic pressure on the North, even as he was threatening Kim with “fire and fury”. Trump’s calculus appears to be that by reducing China’s influence with the North, he is less reliant on Beijing to pressure Pyongyang. This frees his hand to deal with the trade problem.
Indeed, for China, the two big concerns ahead of the Singapore summit were that it would, as a result of this direct rapprochement, lose its valuable leverage with the West as the North’s only ally, and secondly, see its influence over the North diluted. For long, China had enjoyed its position as the only mediator for the West in its dealings with the Hermit Kingdom. With the June 12 summit, however, Trump had signalled that he no longer needed the good offices of Beijing, and that its advantage vis-a-vis the North would count for little as he presses ahead with his tough trade tactics.
The Chinese state media, which for months has played down the likelihood of a trade war and stressed commonalities instead, has started adopting a different line, which includes slamming Trump in the harshest language yet. “The wise man builds bridges, the fool builds walls,” said the official Xinhua news agency. The People’s Daily, the Communist Party’s official newspaper, on the other hand, berated the Trump administration’s “obsession with playing the disgraceful role of global economic disruptor”. The tariffs that Beijing officials announced on $50 billion worth of US goods included $34 billion worth of agricultural products and cars, besides coal and oil. Here, Beijing believes it can inflict pain by targeting Trump’s supporters among farmers and
BEIJING COULD TARGET AMERICAN COMPANIES IN CHINA, BUT IT’LL COME AT A GREAT COST AT A TIME IT NEEDS AMERICAN TECHNICAL EXPERTISE TO UPGRADE ITS MANUFACTURING SECTOR
blue-collar workers, who are most likely to feel the pinch. At the same time, China is more than aware that Trump’s sanctions, especially on billions of dollars worth of electrical machinery, will certainly cause them more pain.
COUNTERING AMERICA
If there was one area where Beijing had been able to counter Trump, it was in its rapid diplomacy with North Korea that has appeared to ensure a favourable outcome from the Singapore summit. If China is losing its valued leverage, it has, however, managed to ensure that its other big concern—maintaining influence over North Korea—was addressed.
There has been genuine concern in Beijing that a historically close relationship was facing the prospect of being upended. For years, China has been the North’s only ally—and biggest source of financial and food aid. The Chinese leadership forged close ties with former leaders Kim Il-sung and his son Kim Jong-il. When Kim Jong-un took over the reins of the country in 2011 following the death of his father, reports out of North Korea suggested that the younger Kim initially viewed relations with Beijing with far less enthusiasm. His older brother, Kim Jong-nam, had been living in Macau in exile, under Chinese protection, while his uncle, Jang Song-thaek, who had been a key advisor to Kim Jong-il, was widely known to have close personal ties with many in the Chinese leadership.
Little was known about 26-year-old Kim Jong-un when he came to power, and the expectation in Beijing was that Jang, and not Kim, would run the show. The younger Kim, however, quickly made clear that he had ideas of his own. Jang was unexpectedly purged in 2013, and state media showed him being dragged away from a party meeting by soldiers. He was then summarily executed, with South Korean intelligence agencies saying that he had been shot to death using anti-aircraft guns. A massive purge of Jang’s supporters followed. Three years later, Kim had his half-brother killed using a nerve agent as Jong-nam was about to board a flight in Malaysia, giving credence to the rumours that the young leader had become convinced of a Chinese plot to depose him and instal Jang and Jong-nam in his stead.
RENEWING THE AXIS
Since then, having established his unquestioned control, Kim Jong-un has been more than careful to keep Beijing on his side. While many Beijing observers believe that one driving force for Kim’s reaching out to the South and to the US is to dilute his dependence on China, the young
leader has been pragmatic enough to understand that if his country was to embark on the path of an economic reform process, his neighbour to the west would undoubtedly be his best bet.
Kim, therefore, was careful to ensure that he first met with Xi before making the trip to the Demilitarised Zone (DMZ) in April for his summit with South Korean president Moon Jae-in. Travelling on his father’s armoured train, Kim made a secretive three-day visit to China at the end of March, and was accorded the red carpet treatment. A senior party official accompanied him for half of the entire journey, while a Politburo Standing Committee member received him on the platform in Beijing. It may have taken Kim six years to make his first visit, but a second visit followed within months, as he flew to Dalian for an informal day-long summit with Xi in May. And a week after Singapore, Kim promptly visited China for an unprecedented third visit in three months.
Heading into Singapore, Xi and Kim both agreed to aim for an immediate end to the economic sanctions that Trump had stepped up—which also caused considerable pain to Chinese energy companies that do business with the North—and a dilution of the American military presence on the Korean peninsula that would suit both their interests.
“Except for a total failure, any summit result would be a net gain for China,” said Tong Zhao, fellow at the Carnegie–Tsinghua Center for Global Policy in Beijing and an expert on nuclear issues. “A substantive agreement would probably include North Korean measures to substantially cut, if not completely dismantle, its nuclear capabilities and US measures to dial down joint military drills with South Korea and restrain its future military deployment on the peninsula. That would all be good news for China,” he added.
Beijing would even welcome a less substantive and more symbolic agreement that would help reduce military tensions and decrease the chances of a war on China’s doorstep, Tong said. Beijing noted with some satisfaction that it was ultimately its own “freeze for freeze” proposal—suspending US-South Korea war games and North Korean nuclear and missile tests, first mooted in March 2017—that Trump and Kim eventually agreed on in Singapore.
It is no surprise then that there is considerable concern in Washington that Trump is giving China what it wants. “The Singapore summit statement is essentially aspirational: no definitions of denuclearisation, no timelines, no details as to verification. What is most troubling about all this is that the US gave up something tangible, namely, the US-RoK military exercises, in exchange,” says Richard Haass, president of the Council for Foreign Relations in New York. Kelly Magsamen, vice-president for National Security and International Policy at the Washington-based Center for American Progress, says the “vague agreement is long on trust and short on details and verification”. “This agreement contains no specific commitments by North Korea and is even less rigorous than either the 1994 Agreed Framework or the 2005 sixparty agreement,” she added.
For China, given the growing US-China strategic rivalry, “keeping Pyongyang closer to Beijing than to Washington may now be a geopolitical priority”, says Zhao of Carnegie. What is of some assurance to Beijing is that both Xi and Kim broadly shared the same concerns, “especially over the US-led alliance in Northeast Asia and the deployment of US advanced military assets in the region”. That said, China has “a strong political interest in a successful US–North Korea summit,” he added. “An improved US-DPRK relationship would help create a regional environment that makes it easy for China (and other countries) to help North Korea develop its economy and gradually transform itself into a more normal and open country. And providing this assistance would, in turn, help keep North Korea close to China.”
China’s biggest concern is a collapse of the Kim regime, that would not only bring hundreds of thousands of possible refugees across the border but also destroy a crucial buffer and bring the US right to its doorstep. Beijing’s long-term end-game is to keep the Kim regime in power, but also to push the North to open up its economy and embrace the path of authoritarian capitalism that China took three decades ago. This would require a softening of global sanctions—what China has long lobbied for— western acceptance of North Korea’s status as a nuclear power, and greater global legitimacy for Pyongang. Just by meeting with Kim, Trump may have already given the North Korean regime the legitimacy it was seeking. And by ending the war games, Trump has acquiesced to what has long been Beijing and Pyongyang’s biggest demand. This has given China some breathing space. But as Trump keeps his powder dry—both on the trade front and in his unpredictable diplomacy with the North that has swung from war to peace in a matter of months—Beijing can take nothing for granted.
GIVEN ITS GROWING STRATEGIC RIVALRY WITH THE US, KEEPING PYONGYANG CLOSER TO BEIJING THAN TO WASHINGTON MAY NOW BE A GEOPOLITICAL PRIORITY FOR CHINA