From Economic War to Hot War? US, China and the End of Strategic Ambiguity over Taiwan

The US has approved an 8 billion dollar sale of advanced F-16 fighter jets to Taiwan, which signifies an economic conflict transitioning into military confrontation. The weapon sale is also indicative of the US abandoning its strategic ambiguity over Taiwan’s status by incrementally withdrawing from yet another key international agreement – the One China policy.

The US position on Taiwan has been characterised with “strategic ambiguity” by consecutive US administrations for four decades. The bellicose relations between the US and China’s communist government came to an end in 1979 when full diplomatic relations were established, and Washington changed its diplomatic recognition of China from Taipei to Beijing. Washington committed itself to the One-China policy, recognising there is only one China and Taiwan is part of it. Concurrently, the US has bolstered Taiwan’s ability to act as a de-facto sovereign state and an ally against China by arming Taiwan. Taiwan is an unsinkable aircraft carrier and thus a key component of the US “island-chains” to contain China in the Pacific.

The US and China are locked in a “deterrence dilemma” over Taiwan. The US deters China from seeking reunification by force by arming Taiwan, while China deters Taiwan from declaring independence by threatening reintegration through military means. US sale of advanced weapons and extending political recognition to Taiwan emboldens the Taiwanese hardliners to push for independence, which will trigger a military response from China. Similarly, the more China threatens to bring Taiwan back under Chinese sovereignty to break the island-chain containment, the more the US will sell arms and become less ambiguous about its support for Taiwanese independence.

Taiwan’s limbo status and the ability to manage the “deterrence dilemma” fail as US primacy wanes. China’s economic and military strength is growing and it is intent to break free of the island chain containment, while the US needs to use Taiwan for greater leverage against China. China optimally seeks “peaceful reunification” by political and economic means, yet reserves the right to take back Taiwan by force if its red lines are crossed. Economic integration assists integration as the shift in economic interests is expected to be followed by political loyalties. Concurrently, China uses its economic prowess to convince other states to de-recognise Taiwan and exclude Taipei from international institutions and events. As China military rises and asserts sovereignty over the South China Sea, Taiwan is expected to be deterred from advancing independence movements.

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Obama’s announced military pivot to Asia in 2011 indicated that the US was becoming less comfortable with China’s rise. Under the Trump Administration, the US has become more brazen and less attached to international agreements. “Trade war” was never an appropriate term to describe the rivalry between the US and China. The geoeconomic rivalry between the two giants encompasses leading technologies, strategic industries, transportation corridors, and financial instruments. As economic coercion intensifies and fails to deliver results, the subsequent antagonism is spreading into the political and military sphere.

Following his election, Trump played the “Taiwan card” by indicating the One-China policy would be used as a bargaining chip towards a trade deal. Trump argued: “I don’t know why we have to be bound by a ‘One China’ policy unless we make a deal with China having to do with other things, including trade”. In March 2018, the US passed the Taiwan Travel Act that opened for diplomatic visits to Taiwan, which upgraded diplomatic relations from the former four decades of unofficial and informal ties. Independence hardliners in Taiwan have since been emboldened and placed increasing pressure on the Taiwanese president to sever political ties with China. The 8 billion dollar sale of advanced F-16V fighter jets to Taiwan, followed by a US warship sailing through the Taiwan Strait, is another escalation that will contribute to transition the current economic war towards a hot war.

US arms sales and revision of Taiwan’s status is paradoxically intended to cement the status-quo as security depends on containing China and preserving US primacy. Provoked by the US sale of advanced weaponry to Taiwan, military incursions into the South China Sea, alleged interference in Hong Kong, and intensifying economic coercion – China is under great pressure to respond as any concessions is feared to be interpreted as a sign of capitulation and thus embolden the US.

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Beijing has warned it “will not sit idly by” and warned of “consequences” of the arms sales to Taiwan. China will prefer to retaliate economically, primarily against Taiwan. Although, Beijing has also threatened sanctions against US corporations supplying weapons to Taiwan, and may repatriate more of its supply chain, dump US debt, and scale back the use of the dollar in trade. China has in the past failed to follow up on its threats over weapon sales to Taiwan, although the stakes are now higher and China is already embroiled in a wider conflict with the US.

The tit-for-tat escalation over economic sanctions may now get a military component. China may posture with more intimidating military capabilities that can neutralise Taiwan’s new military hardware, expand its anti-access/area denial (A2/AD), or impose direct military costs on the US by becoming les cooperative in international security affairs and even provide support for US adversaries. China’s response will be informed by the aim to deter further US transgressions over Taiwan, yet without unnecessarily escalating tensions further.
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Expert Opinions
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.