Minutes after a meeting with Chinese leader Xi Jinping on the sidelines of the Group of 20 summit in Osaka, Japan, President Trump declared, “I think we’re going to be strategic partners.”
This was quite a turnaround from the Trump administration’s standard posture on China. The administration’s National Security Strategy, issued in late 2017, refers to China as a “competitor,” “rival power” and “revisionist power.” Vice President Pence expanded on this framing in his landmark speech at the Hudson Institute in October 2018, essentially describing China as a full-blown ideological opponent of the United States.
Did the administration win so much in Osaka to justify a comprehensive transformation in how to characterize the relationship? Absolutely not.
What did the United States and China agree to in Osaka?
According to the president, the two sides reached agreement on four key points:
1. For now, the United States will not further increase tariffs on Chinese goods.
2. The two sides will resume trade negotiations from where they left off.
3. The United States will relax constraints on sales of U.S. components to Chinese telecom company Huawei.
4. China will buy more U.S. agricultural products.
But the precise details remain highly ambiguous. Chinese media suggested the ban on additional tariffs would not be subject to progress in negotiations. It is unclear if trade talks will resume based on the lengthy text that existed in April — or with the shortened version in which the Chinese side struck out specific commitments. The Commerce Department has yet to specify how much it will relax the restrictions on sales to Huawei. And, finally, no Chinese official has said that China has agreed to new U.S. agricultural purchases.
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Where does this leave things?
This isn’t a full cease-fire, and the relationship is far from stabilized.
The U.S. and Chinese economies have been slowly disengaging. Washington is keeping in place 25 percent tariffs on over $250 billion in Chinese goods, and China still has tariffs on about $110 billion in U.S. products. As a result, two-way trade has started to stagnate. U.S. exports of agricultural products fell from over $24 billion in 2014 to $9 billion in 2018 and only $3.4 billion in the first four months of 2019.
U.S. investment in China has slowed, and a substantial portion is relocating elsewhere in Asia, while Chinese investment in the United States has plummeted. Consequently, U.S. imports of electronics have been falling from China while rising from other countries.
Washington is planning to further limit high-tech exports and investment with China. And China is ratcheting up its strategy to become more independent of foreign technologies and expand its business in Asia, Europe and the developing world.
The trade negotiations face a huge uphill battle. Washington wants Beijing to restrict its industrial policy machine, expand protection of intellectual property, buy more U.S. goods, and accept a stringent enforcement regime. For its part, China wants to protect its sovereignty and have all tariffs withdrawn upon signature.
Beyond commerce, the Trump administration has framed the relationship with China in highly competitive terms, raising alarm bells about China’s growing military prowess, the South China Sea, greater repression at home and efforts to pilfer U.S. technology from universities and companies. Although there is no consensus in the United States on how to respond, many in Congress and the policy world echo these concerns.
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Do the Chinese believe the relationship has improved?
Meanwhile, a parallel shift has occurred in China. China’s top leadership views its state socialist economic model as sacrosanct and demands of full-scale liberalization as tantamount to surrender.
The top leadership sees talk in the United States of an ideological conflict, rising tariffs and high-tech crackdowns as confirmation of an American plan to contain China. Conversely, China’s own economic successes and its ability to repress internal critics — coupled with growing gridlock and internal conflict in U.S. democracy, and global opposition to U.S. unilateralism — give Xi hope for a path to success and a rationale for not caving into Trump’s pressure.
Hence, it appears that Beijing seeks that either Trump will accept a shallow deal that leaves its core economic system untouched — or that it can delay severe U.S. sanctions, and take their chances with either a second Trump administration or a new Democratic one.
Tellingly, the Chinese government has yet to respond to Trump’s reference to a “strategic partnership” — instead, Beijing has taken a cautious tone, warning that the United States should be judged by its deeds, not by its words. One commentary summed up the official anxiety with its title: “Be Vigilant Against Those Who Throw Grenades Backwards.”
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Why is there so much confusion about America’s China policy?
The confusion coming out of the G-20 is not novel, but rather is a regular occurrence in the Trump era. This is the product of two reinforcing elements of the administration. First, the president’s own priorities seem to be constantly shifting. On some days, he appears to be a dealmaker, and on others, he talks and acts like a nationalist hawk. At other moments, he plays the role of showman, varyingly being conciliatory or aggressive just as long as the attention is focused on himself.
And second, the administration comprises a wide variety of opinions and differing priorities, but lacks a systemic mechanism to manage these conflicts. Instead, officials vie for the president’s ear, with their chances of success depending on the immediate economic and political circumstances of the moment.
The result is that the Trump administration seems unable to articulate a broad vision on China, let alone consistently execute it for very long. This uncertainty probably means less chances of full-scale conflict than some fear — but it also makes it difficult for the United States to effectively pursue any particular objective in China policy. In short, the theater of the G-20 seems to have produced a lot of motion, but no real decisive movement when it comes to U.S.-China relations.
Scott Kennedy is senior adviser of the Freeman Chair in China Studies and director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies. He is working on a book, tentatively titled, “The Power of Innovation: The Strategic Importance of China’s High-Tech Drive.”