U.S.-China talks about a trade deal have resulted in a disagreement over the last month. Still, escalation is deemed unlikely because there are signs that an upcoming recession is becoming more likely and no U.S. president facing elections next year wants to risk a recession. What is more, it can be argued that U.S. President Trump is making a strong case against China as mere election rhetoric and if a Democratic candidate wins, the tensions will ease. However, multiple reasons show that the American anti-China stance will not abate anytime soon and will indeed affect policies beyond 2020.

Presidential candidates have to take a strong position against China. “China is going to eat our lunch? Come on, man”, said Democratic presidential candidate John Biden earlier this month during a campaign stop. While Biden answered Trump’s alarmist rhetoric about China with confidence in the U.S. Trump, on his turn, heavily criticized Biden on downplaying the China threat: “Sleepy Joe. He’s a pretty sleepy guy. He’s not going to be able to deal with President Xi”. However, critique on Biden came not just from Trump, as Biden’s comments have come under bipartisan ridicule. “It’s wrong to pretend that China isn’t one of our major economic competitors,” tweeted the Bernie Sanders’ campaign, which has criticized free trade deals Biden supported while serving Barack Obama. Similarly, Democratic presidential candidate Elizabeth Warren is more explicit in her rhetoric against China. Even research by the Pew Research Center shows that Democratic voters are increasingly worried about China’s rising economic strength. For decades, the aim of American foreign policy to China was to accommodate its rise and make it a partner in American rivalry with the Soviet Union. After the fall of the Soviet Union and during the heydays of American hegemony, the hope was that modernization and liberalization would make China a responsible stakeholder to the liberal economic order, thus serving American interests in the long-term. However, it has become the political consensus in Washington that China doesn’t play by the rules of this game, while also undermining U.S. commercial interests (e.g. IP theft, blocking market access for U.S. companies). Furthermore, under Chinese President Xi Jinping, China has increased self-confidence in Asia, built up its military and spread its economic and diplomatic power in Europe and Africa at the cost of U.S. influence. Indeed, whoever will be Trump’s Democratic opponent will have no choice but to have a robust policy to counter the perceived Chinese threat to compete with the President’s own aggressive approach.

Trump is not the first to use China bashing as an election tactic, nor the first President to problematize the Chinese currency policy, the vast trade deficit and intellectual property theft and cyber espionage. But he is especially determined to present himself as tougher on the Chinese than any of his potential challengers in 2020, seeing trade as an area where he can position himself as the strong America-first leader. If he could forge a breakthrough with China on trade, this will be a significant diplomatic achievement and set the standard for his next term or for the next President. If not, then democrats will argue he shows the same lack of teeth as his predecessors and that Trump’s handling of China style does not produce results, the same argument they will use regarding the GOP tax bill or health care.

Implications:

  • It becomes more probable for rising trade tensions between the U.S. and China to boil over in the coming time, as Trump’s campaign advisers have also started to promote the no-compromise approach. An escalation could significantly impact business and financial market sentiment, disrupt global supply chains, and jeopardize the projected recovery in global growth in 2019.
  • The question of how to approach China will further cause divisions within both the Democratic and Republican Party, pitting protectionists against free-traders. However, countering China’s ever more dominant position on the world stage will remain a priority for the next U.S. President. How to manage the rise of China is among the most important foreign policy issues in the 2020 race, one that touches on existential questions about America’s global standing.
  • U.S. allies will adapt to this stronger position against China. As hegemonic confrontation between Washington and Beijing moves closer, it will urge them to take a fiercer anti-China approach.
  • Countries who already show increasing anti-China sentiment because of the
  • Chinese oppressive treatment of its Muslim minorities might further be inspired by the American policy and rhetoric, accelerating tensions for example in Indonesia and Central Asian countries.

The Risk Radar is a monthly research report in which we monitor and qualify the world’s biggest risks to watch. Our updates are based on the estimated likelihood and impact of these risks. This report provides an additional ‘risk flection’ from a political, social, economic and technological perspective.

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