US-China Relationship Is in Turmoil Under President Donald Trump: An Outlook From North America

17.02.2017

Although the US wants to benefit from trade and economic links with China, it does not want China to gain an enhanced status and authority globally. The US was not pleased to see China reaching out to Eurasia, Africa, as well as West Asia, South Asia and to the South East Asian nations through its One Belt, One Road initiative.

The relationship between the United States and China has reached an interesting phase under the leadership of President Donald Trump over many political and economic issues and concerns. The announcement of withdrawal from Trans-Pacific Partnership (TPP), which came just after Donald Trump took office as US President, was a significant factor challenging China’s emerging economic power and assertiveness. For the past two to three decades, the US-China relationship developed very well and without many obstacles, especially in trade and the economy. Both the United States and China benefited from this relationship, making it a win-win for both sides.

The fact that China’s authority in the region has grown substantially, as have its ties with many countries around the world, is not appreciated by the United States. Although the US wants to benefit from trade and economic links with China, it does not want China to gain an enhanced status and authority globally. The US was not pleased to see China reaching out to Eurasia, Africa, as well as West Asia, South Asia and to the South East Asian nations through its One Belt, One Road initiative.

Under the Trans-Pacific Partnership agreement, the United States was to shift its multinational companies’ production facilities to South East Asian countries. The TPP would also have guaranteed protection of intellectual property rights (IPR), a mechanism that did not exist in the past. As a result, China took advantage of this gap in legislation by working closely with US multinational companies, which all shifted their manufacturing bases to China.

President Trump wanted to change this practice in such a way that multinational companies’ production would no longer be based in China or other South East Asian nations. He wants to create more jobs within the US, as this was one of his main election campaign promises. He plans to achieve this by moving the production facilities that are currently based abroad back to the United States. However, there are many challenges to implement this idea, particularly in the case of China. One of the main issues is that the cost of labor in the US is much higher, and therefore, such protectionist policy may not lead to any benefits in the long run. Moreover, now Donald Trump is also considering improving the infrastructure in the US, which will also need huge investment and a healthy economy. Hence, this may even increase US’ dependency on other nations and their investments. Thus, this proposal will come across many challenges and it will be interesting to see how the United States makes progress in this direction and brings it into practice.

Analysts believe that the US withdrawal from the TPP pursues a different, hidden, agenda, which has to do with the increased labor cost in China. At present China is trying to shift its manufacturing bases to neighboring countries due to the rising cost of labor. Therefore, it seems that US investments in China’s manufacturing sector are likely to decrease in the future, which the Trump administration probably realizes. The withdrawal from the TPP will improve the US job market, serve national interests, and win popular support. Donald Trump, who for many years was part of the corporate sector, must be aware of the challenges arising from this move. However, his political ambitions are likely to lead him to this particular direction, at least for the time being, when his election campaign promises are still fresh in the voters’ minds.

Most analysts in the United States believe that once the political mood in the US is settled down, Donald Trump will try to keep the current practice intact in disguise of bilateral trade with all the TPP nations. Experts who analyze the current political climate in the US also believe that President Trump may not be reelected for the second term, and hence, he has the advantage in that he can take harsh decisions leaving the next administration to deal with the aftermath in the future.

Nonetheless, the discourse within China shows that there is growing concern over slow economic growth. As a result, China is also trying to extend its economic activities to other parts of the world and to increase its bargaining power with the US. Today, China is also running a risk of stagnating growth unless it finds quick revenue options outside the United States. The One Belt, One Road initiative is one of the significant steps in that direction taken actively by the Chinese government under the leadership of President Xi Jinping. In addition, along with its economic and trade expansion, China is also focusing on its geo-strategic ascension. This might also bring it in conflict with the current US administration, since the differences between them are already growing with regard to the geo-strategic space and geo-strategic location, along with collaboration and sharing of the benefits in the geo-economic sectors.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

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