U.S. President Donald Trump's decision last week to sign the Hong Kong Human Rights and Democracy Act pleased China more than either the city's protesters or investors seem to realize.
On the surface, all the protesters' renditions of U.S. national anthem "The Star-Spangled Banner" paid off for Hongkongers. In recent months, many took to the street signaling their hope for Trump's support by waving America's flag and singing the anthem. Last week, the U.S. president appeared to respond.
Investors, meantime, worried immediately that the U.S.-China trade deal was suddenly dead. In their defense, President Xi Jinping's spin doctors fanned those flames with talk of how Trump's "erroneous act" was a "blatant hegemonic move" with grave consequences.
A closer reading suggests both conclusions are wrong. Last week was actually a win for Xi -- and prospects for a phase one trade deal remain on track.
Trump had no choice. The pro-Hong-Kong bill he signed on November 27 had overwhelming support from both Republicans and Democrats. With Trump weakened by impeachment proceedings, there was talk that lawmakers would override a veto.
While begrudgingly putting pen to legislative paper, Trump did Xi a favor. He added a signing statement noting, rather cryptically, that "certain provisions" of the bill "would interfere with the exercise of the president's constitutional authority to state the foreign policy of the United States." Memo to Xi: "Never mind the bill."
Rightfully so, Beijing seized on that wording as a signal that the most commercially transactional leader in U.S. history has Xi's back. As if to add an exclamation point to his signing statement, Trump stressed he was acting "out of respect" for Xi.
More to the point, though, Trump has his own back in mind as a bull market in scandals jeopardizes his chances of reelection come next November. As the impeachment process intensifies, Trump is eager to achieve even a limited deal with China.
Odds are, China will agree to buy another $50 billion or so of U.S. goods. It might even agree, in vague and nonbinding terms, to work harder to police intellectual property rights. The game, though, is to craft a face-saving victory -- one Trump can sell to his base and Xi can hawk in Communist Party circles in Beijing.
Trump can forget a phase two deal that fundamentally remakes U.S.-China trade dynamics. One reason is what's afoot in Washington. One the one hand, China is bracing for Trump's Democratic rivals -- including Senators Bernie Sander and Elizabeth Warren -- to aim more political shade China's way.
Xi knows his presidency will outlive Trump's, but also that American anti-China sentiment will too. This sentiment has arguably grown more intense among Democrats heading into 2020, but is also an area of rare consensus in an otherwise polarized Washington.
Look no further than Republican Senator Tom Cotton, a hard line conservative, joining hands with Democrat Senator Charles Schumer, a New York liberal, against TikTok. They want national security officials to probe the ubiquitous video app owned by China's ByteDance. It is emblematic of Washington's efforts to curb Huawei and other giants at the heart of Xi's Made in China 2025 program.
The wild card is how Trump responds when he realizes there is no phase two.
Trump would, after all, have some explaining to do. Farmers in states he needs for his reelection -- in Iowa, Michigan, Missouri, Wisconsin and elsewhere -- will wonder what the last two years of tariffs and near-bankruptcy were all about. Last week, Trump went around Congress to send another $20 billion worth of bailouts to farm states.
Still, Trump will be looking to throw fresh red meat at his supporters. If that entails increased China tariffs or engineering a weaker dollar, Asia will be in for a rough 2020.
That certainly goes for Japan. The deal Trump hammered out with Prime Minister Shinzo Abe made barely a ripple in the global media or markets. Now, Congress is holding up passage with questions about Trump whether overstepped his negotiating authority. Might Trump, frustrated by gridlock, impose the 25% taxes on imports of cars and auto parts he has long threatened?
Abe has other reasons to fear any further talks, considering Trump's shenanigans with South Korea. Trump, according to press reports, is angling to shake Seoul down for an additional $5 billion to host U.S. troops -- an increase of roughly 400% in 2020. Might Tokyo get a similar request, particularly if Abe demurs on additional concessions?
And, really, would anyone be willing to bet that Trump, in private talks with Xi, would not throw Hong Kong -- or Taiwan -- under the proverbial bus to get a bigger deal? I sure would not.
The best-case scenario is that Trump and Xi sign a phase one deal, declare victory and move on. Yet there is always the risk Trump responds badly to Xi's recalcitrance -- and his own political peril at home.
The worst case would be for the two to fuse together in Trump's mind. That means escalating trade tensions -- increased economic pain for an Asian region that hoped things could not get any worse.
William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."