November 28, 2016 3:30 pm JST
Minxin Pei

US-China relations in the Trump era could go three ways

Collision, bonanza or kabuki? Scenarios on how the President-elect may govern.

Given the mercurial nature of U.S. President-elect Donald Trump, it seems a fool's game to speculate over how he will govern at home and maintain U.S. leadership abroad. Since his surprising Nov. 8 election victory, the real-estate mogul has flip-flopped on several key issues. In an interview with the New York Times published on Nov. 22, for example, Trump declared that he would not carry out his threat of investigating and possibly jailing his Democratic rival in the election, Hillary Clinton. On the critical issue of climate change, he appeared to retreat from his campaign promise of withdrawing from the 2015 Paris Accord, claiming he would keep an "open mind."

For Chinese leaders, any sign of pragmatism from the U.S. president-elect should allay fears of a calamitous rupture in Sino-American relations. However, it may be too early for President Xi Jinping to breathe a sigh of relief. Trump so far has said little about his campaign threat of imposing punitive tariffs on Chinese imports, and what he has said about his vow to building a 350-ship naval fleet should sound alarms in the headquarters of the People's Liberation Army. Most critically, Trump has yet to assemble a full foreign policy team and staff it with Asia experts versed in the complexity of U.S.-China relations.

Since Trump's foreign policy positions remain fluid, the most reasonable thing analysts can do is to examine a range of scenarios of U.S.-China relations under a Trump administration. Here are three to consider:

Collision course

This is by far the worst-case scenario. If Trump fulfills his pledge to impose punishing tariffs on Chinese goods -- under U.S. law he can authorize a 15% import duty for 150 days without congressional approval -- exports from China to the U.S. would plummet. An estimate by HSBC suggests that, in an extreme, albeit unlikely scenario, imposing a 45% levy in tariffs would see Chinese exports to the U.S. cut in half and result in a 2% fall in China's gross domestic product. A 10% increase in U.S. import duties on Chinese goods, a more likely move, could reduce Chinese exports to the U.S. by 17% (or about $72 billion based on 2015 trade data). Beijing would likely retaliate by targeting American companies that sell a large quantity of their products to China, with Boeing, Apple and General Motors the most vulnerable. American agricultural exporters, too, would suffer because China is one of their largest overseas markets.

In this scenario, while the number of container ships ferrying Chinese goods to the U.S. would plunge, the number of U.S. warships dispatched to East Asia to counter China's growing naval power would rise. Trump could actually accelerate the military deployment in President Barack Obama's "Asia pivot" strategy, even as he buries the Trans-Pacific Partnership, the commercial pillar of the pivot.

This 1-2 punch would almost certainly destroy the foundations of cooperation of U.S.-China relations. As the commercial underpinnings of U.S.-China ties collapse, China would have fewer inhibitions in confronting America. One could easily imagine a scenario in which Xi calls Trump's bluff by militarizing the islands that China has built in the South China Sea and aggressively challenging U.S. aircraft and warships conducting "freedom of navigation operations" in the region.

Elsewhere, Beijing could also thumb its nose at Washington by openly supporting Iran and other U.S. adversaries. Taking a page from the playbook of Vladimir Putin, who has been determined to exact a price on the U.S. for its unfriendly policy toward Russia, Xi could similarly show Trump that there is considerable cost in pursuing a gratuitous anti-China policy.

Unexpected bonanza

This could be Beijing's dream scenario, under which Trump's rhetoric and policies ultimately result in the abdication of American global leadership and Chinese dominance in Asia. Under this situation, U.S.-China relations would take a hit but nevertheless avoid a total collapse, either because Trump's actions are not as extreme as feared or because the Chinese response is muted. However, Trump's other actions could create unprecedented strategic opportunities for China to realize its long-sought strategic goal -- establishing itself as Asia's dominant power. On the trade front, the death of the TPP has already given Beijing a chance to show its neighbors that they cannot count on the U.S. for their long-term security and prosperity. Following Trump's win, China immediately intensified its efforts to promote the Regional Comprehensive Economic Partnership, or RCEP, Beijing's answer to the TPP (which does not include China).

With China as the largest export market for nearly all of its neighbors, the RCEP would further cement the country's role as Asia's commercial hub. Even though the security payoffs from the RCEP may not be immediately visible, Chinese policy-makers believe that they will not have to wait long. Once leaders in most Asian countries realize that their relations with China are far more important than those with the U.S., they would get on China's bandwagon and Washington's alliance system in Asia would start to unravel. Of course, Japan, India, and perhaps Vietnam would not want to fall into China's orbit, but with diminishing U.S. economic influence in Asia, China would find it easier to isolate or accommodate these recalcitrant neighbors.

An overlooked bonus of Trump's victory, at least from the perspective of the Chinese Communist Party, is the disrepute the U.S. presidential election could bring to the idea of a liberal democracy and, in particular, the long-term damage a Trump presidency could inflict on the image of American democracy as the proverbial beacon of freedom. That a bombastic and autocratic billionaire could win the White House is evidence enough that democracy, at least the American version, has lost much of its luster, the thinking would go. There are other concerns that Trump, as president, could further undermine American democratic institutions and human rights by implementing mass deportations of illegal immigrants, legalized discrimination against minorities, harassment of the press, and suppression of those who voted for Clinton. Should such acts of democratic backsliding occur, Washington would have forfeited its moral authority to lecture Beijing on human rights and democracy. America's ideological threat to the Communist Party's rule would evaporate, giving China's one-party state a new lease of life.

Kabuki show

Between "collision" and "bonanza," there could be another scenario -- kabuki. Essentially a variation of the status quo, this scenario assumes Trump's China policy differs little in substance from Obama's. Despite his thundering threats, Trump would realize soon after moving into the White House that a trade war with China is both unnecessary and counterproductive. His priorities are massive tax cuts, deregulation and infrastructure investments. Waging a costly trade war with China may please white working-class workers in the American Rust Belt, but it could hurt the U.S. economy at a moment when Trump desperately needs to earn political capital with higher growth. Nevertheless, the former reality-show host knows that he must act as if he is tough on China. He could accomplish this with symbolic measures such as labeling China a "currency manipulator" but shying away from imposing punitive tariffs. He could also levy anti-dumping charges on certain Chinese imports, most likely steel, aluminum and furniture, to show that he is fulfilling his campaign promise. It is unlikely that Beijing would react harshly to such measures, even though it would protest loudly.

On the security front, regardless of how eager Trump and his administration might be to push back against China's growing military might, other more pressing problems would most likely get in the way. In particular, Trump's national security team is filled with officials who hold a very dim view of Islam and advocate a far more hardline policy toward Iran and the Middle East. If they get their way, the U.S. would find itself dragged further into the quagmire in the region. Such a situation would not only distract Trump from China, but it would also give Beijing greater leverage in constraining U.S. action in Asia because Washington would need some degree of Chinese support, if not acquiescence, in confronting Iran and pursuing a more aggressive policy in the Middle East.

It is not yet clear which of these three scenarios will materialize. The most likely initial outcome may be a confusing and ever-changing combination of elements from all three alternatives. U.S.-China relations under such conditions would undoubtedly be highly volatile. But that is only to be expected when the new occupant of the White House is someone who has won a long shot race by throwing away the rulebook of American politics. At some point, Trump will find that breaking the rules governing geopolitics in general and U.S.-China relations in particular can have undesirable consequences. But until that moment arrives, we are most likely in for a wild and unpredictable ride.

Minxin Pei is a professor of government at Claremont McKenna College and the author of "China's Crony Capitalism" (2016)

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