Chasing the dragon

It will be all smiles when Donald Trump meets President Xi Jinping this week in Osaka at the annual meeting of the G20: a show of comity for the cameras and financial markets. The two are midway through one of the biggest trade wars that the world has seen in recent years, with the US imposing tariffs on $250 billion of imports from China and Beijing retaliating in kind. It’s possible that some sort of truce will be reached, as it was when the two men met late last year. The next stage of escalation — additional tariffs, or worse — may be postponed again.

Don’t be misled. The tariff fight is only the most visible, outward sign of a much larger struggle. Security specialists are clear that the new realities of global power revolve around the age-old question of whether these two superpowers — one established, one emergent — can co-exist peacefully, or whether some form of conflict is inevitable, by accident or design.

There are plenty of doubts about Trump’s foreign policy credentials, reinforced perhaps last week by his decision to rescind an earlier order to strike Iranian targets in retaliation for the shooting down of a US drone. On China, however, even critics acknowledge his administration has fundamentally reoriented US policy — and in a way that might even work. For years, China has been stealing secrets from western giants, prospered under an unfair trade regime, and got away with it. It took Trump to blow the whistle.

Over the past two decades, China has risen on the world stage to become the most powerful strategic rival to the US at least since the Cold War. All the time, Washington has been grappling ineffectively with how to handle the changed geopolitical circumstances. In the post-Cold War world, under successive Republican and Democratic presidents — beginning with George H. W. Bush, and continuing through Presidents Bill Clinton, George W.  Bush and Barack Obama — the approach was to accommodate.

As Larry Summers, a top economic policy official under both Clinton and Obama put it, when historians look back on this period, the most important question of the first half of the 21st century will be whether the US was able to peacefully accommodate the rise of China. The election of President Trump has opened a new chapter in that history. In keeping with his approach to everything, his initial focus was transactional. In his view, the primary issue between the two countries was a commercial one — the $375 billion US trade deficit in 2017 with its largest trading partner was prima facie evidence that China was cheating, taking advantage of his predecessors’ softness.

But it was soon clear that the underlying change in the US stance towards China was geopolitical and strategic. A new breed of notably hawkish foreign policy advisers and China specialists around Trump — many of whom arrived a year into the Trump presidency — had concluded that the US needed to challenge China’s rise more broadly. The leading figures include Vice-President Mike Pence, a longtime critic of China’s human rights record. Then John Bolton, Trump’s national security adviser for the past year; Mike Pompeo, the secretary of state and a long-standing hawk; and outside the administration, Michael Pillsbury, a highly influential thinker and China expert whose book, The Hundred-Year Marathon, argues that the US has badly underestimated China’s strategic ambitions for the past two decades.

A few months ago, I asked Bolton if he believed China’s economic strength was good or bad for the US. He preferred to talk about how the US had misjudged China.  ‘For years, American policy was based on the assumption that bringing China into the WTO would increase pressure to conform to international norms in trade and business areas. That has obviously not happened,’ he said. ‘We had decades of people [saying] the modernisation and economic growth of China would produce increased political freedom and more representative government. That hasn’t happened, either.’

Trump’s National Security Strategy — essentially the foreign policy manifesto of a new administration — was published at the end of 2017. It set out, in far starker terms than any of its predecessors had done, that the US now regarded China as a strategic rival. China is mentioned twice as many times in Trump’s strategy as it was in Obama’s. Talk about the threat that China poses to US economic and national security interests dominates the document.

While Trump sends mixed signals about US intentions — with his trademark brand of personal comity and tweeted threats — it’s been left to senior deputies to lay out the strategic position. Pence seems to have been given explicitly the role of ‘bad cop’ in the administration’s China diplomacy. In a widely scrutinised speech in October to the Hudson Institute, Pence gave one of the most aggressive verbal assaults on a major foreign power by an American leader since Ronald Reagan shocked much of the West by taking on the Soviet Union in belligerent rhetorical terms. Pence attacked Beijing’s human rights record, and its projection of power in Asia through both economic (the Belt and Road Initiative) and military (its expanding presence in the South China Sea) methods.

The speech earned Pence bloodcurdling denunciation in Beijing, where official mouthpieces warned that it marked the start of a new Cold War between the two nations. The Cold War terminology has been widely used by commentators in the US too but Pence and senior officials are careful to avoid the analogy. They are aware there are critical differences between the context of the US-China confrontation and that between the US and Russia from 1949 to 1991.

The most significant is that China’s economy is much larger and more important than Russia’s ever was. Although some Russia apologists made elaborate claims about the Soviets’ economic prowess, the country’s role in the global economy was a fraction of China’s. And the significance of China’s role is underscored by the degree of economic integration between the US and China. US imports from China are more than $500 billion. China is one of America’s biggest creditors, holding tens of billions of dollars of US Treasury bonds. This gives Beijing a valuable weapon should relations deteriorate.

A third key difference is that there is no clearly delineated geographic Cold War potential battlefield, as there was for so long with the North German Plain. That may lessen the risk of a Cold War turning hot, but it also complicates the defensive strategy for the US and its allies.

That said, foreign policymakers in the administration still look to the Cold War to help guide the relationship with China in the coming years. ‘We’re in a different historical context now, but that doesn’t mean there aren’t valuable lessons that provide us with a basis for how to address China,’ says Eric Edelman, a senior Pentagon official in the Bush administration who recently headed a strategic review of US defence capabilities in the face of the rising threat from China.

So how to address it? The Trump strategy — and there is a strategy — has four pillars. The first is to restrain and challenge China’s technological growth and prowess and its ability to exploit technology to project its influence and power. At a Wall Street Journal conference this month in Washington, Bolton said that Trump has emphasised how China’s ability to project strategic force in Asia or around the world depends on its economy — an economy ‘that has been based over the years on theft of intellectual property, forced technology transfer [and] discrimination against foreign investors’.

This might explain the ferocity of the row over Huawei and other Chinese technology companies, and it may well become an increasingly important feature of US policy. Officials are concerned at the advances China has made in certain areas — artificial intelligence especially, but also hyper-sonics and military technologies. Washington is increasingly likely to do all it can to block transfer of US technology in these areas and to expect allies such as the UK to do the same.

The second pillar is a concerted effort to reduce US economic dependency on China. Tariffs may be justified in Trump’s mind by China’s ‘cheating’, but they are also clearly designed to discourage US investment in China. As US tariffs make goods made in China more expensive, US companies are beginning to shift production and other functions out of China, either home or to other Asian markets.

Then we have the US seeking to strengthen its general influence in Asia, as a counterweight to China. This means bolstering its defensive partnerships with key allies such as Japan, South Korea and the Philippines. It’s a fine idea in theory, but in reality is proving a challenge for the administration. To the frustration of the China hawks, Trump’s aggressive stance on trade with almost all countries — especially Japan — is complicating US strategic efforts to forge closer ties.

But a recent sign of a shift came when Trump visited Japan a few weeks ago, becoming the first US president to step on board a warship of the Japanese navy — technically Japan’s Self-Defense Forces, since its post-second world war constitution forbids a traditional military. The helicopter carrier JS Kaga is being upgraded to a full aircraft carrier capable of transporting dozens of new F-35 fighter jets, recently ordered from the US, which still has 50,000 troops there.

The fourth and final pillar of the Trump strategy is a broad effort to improve US offensive capabilities. To start thinking more openly about war with China, and how it might be won and then, just as it did with the Soviet Union in the 1980s, raise the pressure with effective military competition. At a Wall Street Journal conference last month, Michael Pillsbury observed that, even ten years ago, military journals would never let any author write about a war with China. Now, he says, almost every one will have an article asking: ‘What new weapon system should the navy buy to defeat China?’

The Cold War was characterised by a very public stealthy ideological struggle. Given the technological advances since then — the rise of social media and other channels of communication — this kind of contest will be just as important in the fight with China.

No one thinks a war with China is either desirable or likely. But what’s changed in the US since Trump came to power is a belief that, just as with the threat from the old Soviet Union, peace is more likely to be achieved through enhanced US strength and a willingness to project it than through accommodation and vacillation.

Now listen to Gerard Baker talk to Isabel Hardman and Dr Yu Jie, from Chatham House, about America's containment policy: