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The monkey king raised his cudgel, and there was great disorder in Heaven. The jadelike firmament was cleared of dust

With this phrase, Mao Zedong began China’s Great Proletarian Cultural Revolution. As nearly all Chinese would know, the phrase comes from a 16th century novel that has roots in folk beliefs dating from at least a millennium before. Among the mythical monkey’s powers was the ability to turn every hair of his head into individual cudgel-brandishing small monkeys. By this metaphor Mao was signaling an attack on what he regarded as an increasingly stultified and ideologically suspect establishment: the cudgels of the Cultural Revolution would be wielded by millions of young Red Guard avatars.

Here the analogy with US politics breaks down a bit. While Donald Trump’s campaign rhetoric signaled his desire to attack the establishment in order to make America great again, his supporters were predominantly white working-class adults rather than youth, the latter group having favored the kind of left-of-center rebellion against the establishment led by defeated Democratic candidate Bernie Sanders, and who came out in droves after the election to protest Trump’s victory. One of the burning questions of the campaign was what, if anything, should be done—or could be done—about China. Part of Trump’s formula for making American great again was to deal firmly with Beijing, whom, along with a greedy US corporate culture that his detractors pointed out Trump is part of, he viewed as the chief reason for America’s fall from greatness.

According to Trump, successive US administrations have got China wrong. During the 45 years since the establishments of formal diplomatic relations, both political parties have encouraged China’s development in the belief that a prosperous China will be a peaceful China. A poor and dissatisfied China, by contrast, would tend toward belligerence and even war. Prosperity would have a positive effect on the heretofore repressive political system: an economically developed PRC would inevitably develop into a liberal society that would be well integrated into the international order. In the frequently cited 2005 words of then-Deputy Assistant Secretary of State Robert Zoellick, China would become “a responsible international stakeholder.” Adopting Beijing’s own description of China’s “peaceful rise,” US policy officially welcomed that development, as decision makers and most of the commentariat advised the need to accommodate the rising power.

The evolution, they believed, was only a matter of time. The Clinton administration championed the PRC’s entrance into the WTO as a “poison pill” for China.¹ Yet, almost immediately the US trade deficit with China, already a concern, began to balloon. As of September 2016, the accumulated deficit was USD 1.557 trillion, with the PRC holding 30 percent of the country’s total debt to foreign creditors.² Labor unions railed against jobs, and, sometimes, entire companies, decamping to China, where low wages, lax safety standards, inattention to pollution, and poor quality control allowed Chinese products to undercut the price of comparable items manufactured in the United States.

US corporations complained that, although Chinese firms were able to enter the US market with relative ease, Beijing placed restrictive barriers on their entering the Chinese market: the playing field was not level. Other trade related difficulties involved rampant theft of intellectual property rights, charges that Beijing was keeping the value of its currency artificially low so as to stimulate exports, and dumping goods on the US market at prices below the cost of the materials used to make them. As businesses grew more Internet-dependent, cyberespionage and computer hacking entered the list of concerns. These were added to perennially contentious issues between the two involving human rights and the status of Taiwan.

While China, indeed, became increasingly prosperous, its leadership did not become more accommodative to internal dissent, nor did its behavior become more peaceful. Double-digit increases in its reported defense budget—which is believed to understate actual expenditures by a substantial amount—continued nearly every year beginning in 1989—coincidentally, the year of the Tiananmen massacre—even as most countries were reducing their defense budgets in response to the disintegration of the Soviet Union. At first dismissed as a “normal” response to the country’s impressive economic growth rates,³ and explained by the Beijing government as meeting the need for better living standards for the military and to compensate—or overcompensate, given officially reported increases in consumer price increases—for inflation, their cumulative effect and the types of weapons they were buying became worrisome.

Such fears were exacerbated by the PRC’s increasingly assertive international behavior. Claims to territories within a Beijing-delineated nine-dash line that encompassed eighty percent of the South China Sea and conflicted with the claims of six other states began to be more vigorously enforced. When, at a 2010 security forum of ASEAN, Secretary of State Hillary Rodham Clinton declared that "Legitimate claims to maritime space in the South China Sea should be derived solely from legitimate claims to land features" and offered to facilitate efforts to create a code of conduct in the region, Chinese foreign minister, later promoted to state councillor Yang Jiechi, stormed out of the meeting. When Yang returned an hour later, he stated emphatically that the area was China’s to regulate, international law notwithstanding, and accused the United States of plotting against China. Staring directly at Singaporean foreign minister George Yeo, Yang added, “China is a big country and other countries are small countries, and that’s just a fact.” ⁴ China also ramped up its activities in the East China Sea, where it claims the Diaoyu (Senkaku) Islands and declared an Air Defense Identification Zone (ADIZ) encompassing the contested area, accompanied by more stringent conditions than claimed by those of other countries.

Trump’s Campaign Rhetoric

As politicians of all parties in countless elections are wont to do, Trump railed against the stultified policies of a hide-bound Washington establishment. What made Trump unique and, on this point at least, believable, was that he truly is an outsider: someone who has never held, or even sought, political office. To his detractors, that made him uniquely unqualified and therefore dangerous: inexperienced in the “ways of Washington”—hence he would be unable to cope with the challenges of the presidency. Moreover, they pointed out, his personality, also unique, was bound to cause difficulties in working with both Congress and the bureaucracy. Given to brash, extreme statements, particularly on women and minority groups, that he was sometimes persuaded to retract, Trump, despite being a political novice, was well known to millions as the host of a reality show The Apprentice, in which his stock phrase was “you’re fired.” During his campaign, this transmogrified into a Trump vow to “drain the swamp” of waste, fraud, abuse, and unethical practices in the nation’s capital, one facet of which was to prohibit lobbyists from jobs in his administration and impose a lifetime ban on members of his administration from becoming lobbyists when they left government. If acted upon, this would inhibit officials who hope for post-government employment with Chinese corporations or corporations doing business with China from according favorable treatment to deals that would not only enhance their profits but, in some cases, compromise national security as well.

On trade issues, “the Donald” presented a seven-point plan, most of which touch on relations with China either directly or indirectly:
1. Withdraw from the TPP, which has not yet been ratified.
2. Appoint tough and smart trade negotiators to fight on behalf of American workers.
3. Direct the secretary of commerce to identify every violation of trade agreements a foreign country is currently using to harm our workers, and also direct all appropriate agencies to use every tool under American and international law to end these abuses.
4. Tell NAFTA partners that we intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. If they don’t agree to a renegotiation, we will submit notice that the United States intends to withdraw from the deal. Eliminate Mexico’s one-side backdoor tariff through the VAT and end sweatshops in Mexico that undercut US workers.
5. Instruct the treasury secretary to label China a currency manipulator.
6. Instruct the US Trade Representative to bring trade cases against China, both in this country and at the WTO. China’s unfair subsidy behavior is prohibited by the terms of its entrance to the WTO.
7. Use every lawful presidential power to remedy trade disputes if China does not stop its illegal activities, including its theft of American trade secrets—including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962.

As to the consequences of draining the swamp, or at least excising its somewhat more unsavory practices, lobbying groups have cautioned against such a restriction, arguing that it would discourage potential candidates from seeking jobs in the administration; it would be likely to reduce the number of people with expertise from serving in the government.⁵ How much of this is valid and how much simply an effort to protect their vested interests is open to question. Still, there are legitimate concerns about the post-government service of even clearly knowledgeable people.

As a case in point, Timothy Geithner served as secretary of the treasury in the Obama administration, during which time Treasury’s annual review repeatedly ruled that China was not a currency manipulator, and was repeatedly criticized for doing so. As secretary, Geithner also presided over the Committee on Foreign Investments in the United States (CFIUS), which is required to submit an annual report to Congress on foreign direct investment into the United States with particular regard to those investments affecting critical infrastructure and industries affecting national security.⁶ According to a recent Forbes article, during Geithner’s tenure, CFIUS approved the sale of the Minnesota-based aircraft company Cirrus Industries to the Aviation Industry Corporation of China, AVIC, China’s largest state-owned aerospace defense company. Cirrus then secured access to Oak Ridge National Laboratory officials seeking joint research and development that would enable them to receive technology information from the laboratory. Oak Ridge, funded by American taxpayers, develops sophisticated materials for US military and commercial use. After leaving government, Geithner joined the private equity firm Warburg Pincus, where he led the acquisition of a USD 680 million share of Huarong, a Chinese state-owned asset management corporation, in a closed sale. As Forbes noted, this could be construed as a handsome reward to Mr. Geithner for smoothing the approval of Cirrus’ transfer to AVIC.⁷ Since cause and effect are typically difficult to prove, the proposed rule is intended to remove the suspicion of wrongdoing.

With regard to Trump’s trade policy, one of his most prominent advisers, the Harvard-trained economist Peter Navarro, points out that, in fact, Trump had vowed to impose countervailing tariffs of up to 45 percent not only on China, as had previously been reported, but on any American trade partner that cheats on its trade deals using practices such as currency manipulation and illegal export subsidies. Bolstering his argument with examples from George Washington, who signed a tariff justified as a necessary defense against a mercantilist Europe, through Ronald Reagan, Navarro believes that such tariffs should be regarded as defensive rather than, as critics have termed them, protectionist. To those who charge that his trade policy constituted dangerous protectionism, Navarro states that China’s state-owned industries significantly undercut foreign manufacturers. About 39 percent of China’s price advantage comes from lower labor costs, with five other unfair trade practices—illegal export subsidies, currency undervaluation that discourages US exports to China while reducing the price of Chinese-made good in US markets, intellectual property theft , lax worker safety measures, and environmental regulations accounting for the rest. By Navarro’s reckoning, these amount to 43.7 percent of the artificially high price of Chinese manufactured goods, or almost exactly the amount of Trump’s proposed tariffs. For Trump, steep tariffs are a strategic negotiating strategy to stop China or any other country from cheating on international trade deals and crucial to bringing manufacturing jobs back and jumpstarting the growth of gross domestic profit, thereby generating the tax revenues that are needed to pay for the infrastructure, social services, and defense needs in order to make America great again.⁸

In bringing jobs back to America, Trump may receive some unexpected help: Hon Hai Precision Industries, the huge Taiwanese contract manufacturer of Apple products, among others, has just announced that it is considering shifting production from China to the United States.⁹ Hon Hai, which recently absorbed financially troubled Japanese electronic giant Sharp, has 1.2 million employees in China.

Others have argued that pulling out of the TPP, which would effectively kill it, would directly benefit Beijing. Since the TPP was set up to counter the Regional Comprehensive Economic Partnership (RCEP), the demise of the TPP would leave the field to Beijing. Pressed by the Obama administration, Japanese Prime Minister Abe Shinzo had to wage a vigorous campaign to get TPP passed by the Diet against strenuous resistance by the country’s powerful agricultural lobby and is surely unhappy with Trump’s stance. Concern with what would happen to the TPP is believed to have been a major focus of his conversation with the president-elect. Taiwan, whose new president has vowed to reduce what she and her party consider to be excessive dependence on the Chinese market, will also be disadvantaged by TPP’s demise.

The Economist has predicted that the collapse of the TPP will leave a void in Asia, undermining America’s role as an economic power in the region and allowing Beijing to set the rules of the international finance system in a way that will benefit the Chinese economic juggernaut.¹⁰ The TPP’s raison d’être is as much strategic as economic. Bilateral agreements will prevail, and since no country approaches the size and strength of China, the negotiations will be between distinctly unequal entities. Moreover, while TPP contains stronger protection for labor rights, more environmental safeguards and, uniquely, measures to limit government support for state-owned companies, RCEP, by contrast, is weak on all of these. Similar concerns have been voiced about Trump’s avowed intention to pull out of the Paris Climate Accord, which he believes disadvantages American businesses.

China Gets a Vote

The country that Trump accused of perpetrating the greatest theft in the history of the world has vowed to retaliate. Its Global Times claimed that any new tariffs would trigger immediate countermeasures from Beijing, warning that if this happens, Boeing orders would be replaced by Airbus, auto and iPhone sales in China curbed, and imports of soybeans and maize would be sourced from other countries. China might also limit the number of Chinese students studying in the United States. American universities consider their presence to be an important conduit to introducing the students to American norms of democracy. Though scarcely mentioned outside the academy, their tuition fees contribute to the financial wellbeing of the universities as well as the US economy. The foreign ministry used more diplomatic language to caution Trump, with spokesperson Lu Kang telling reporters that he believes that any US politician who places the interests of his own people first would adopt a policy conducive to economic and trade cooperation between China and the United States.¹¹

Trump’s advisers might find the example of a similar effort by Japan to be instructive. In 2001 the government responded to pressures from the powerful farm lobby by imposing tariffs on the fibers used in making tatami mats, spring onions, and shiitake mushrooms. As the legislation made its way through the Diet, Beijing warned of consequences if it passed. When it did, China imposed counter tariffs on Japanese cars, air conditioners, and cell phones. Since all three had more higher value-added content than the agricultural goods Tokyo was trying to exclude, the Japanese government soon backed down. The slightly face-saving compromise was that producers in both countries would “exchange information about market demand, product quality, production volume, and prices”¹² It is not difficult to imagine a similar kind of retaliation against major US corporations and the kind of pressures their representatives—whether called lobbyists or something else—could put on the Trump administration to back down.

Most Chinese analysts did not seem concerned about Trump before his telephone call with Tsai Ing-wen, discussed below, reasoning that as a businessman, he will see the danger of imposing tariffs that would trigger a major trade war. Whatever the country’s behavior in the past, designating the PRC as a currency manipulator now would have little practical effect: recently, the government has been infusing large amounts of capital to try to prop up a declining renminbi, to the dismay of economists who warn that such measures are not only unsustainable but will worsen problems in the long run.

Defense

While Trump had vowed to reduce America’s role in the world, this is not, contrary to his critics’ charges, equal to isolationism, a reduction ad absurdum of his words. Nor is Trump likely to be able to reduce its role substantially. Given China’s assertive activities in many areas of the world, withdrawing the United States would run directly counter to Trump’s promise to stand up to China. The mantra that there can be no solution to problems such as North Korea and Iran’s nuclear proliferation activities has sounded ever less convincing: whether because of failure of will or failure of ability, Beijing has not provided the solution to these problems. North Korea continues to test weapons of mass destruction, and there are fears that Iran is violating the non-proliferation agreement reached under the Obama administration. To many, Beijing is not the solution to major world problems; it is the source of them.

Campaign rhetoric about reducing US forces in Asia unless America’s allies do more for their own defense and saying that he is in favor of Japan and South Korea having nuclear weapons is likely to have been another bargaining chip: either you pay up or the United States pulls out. According to his leading foreign policy advisers, Trump is fully aware of the importance of Asia. Thai political analyst Thitinan Pongsudhirak spoke for many, both Americans and allies, when he characterized the Obama administration’s pivot to Asia as “shallow and unreliable, underpinned by rhetorical footwork with little substantive thrust.” Thitinan likened the pivot to the president’s infamous red line in the Middle East.¹³ Never properly funded, it gave Beijing an excuse to claim China had been provoked into enhancing its defense posture, declaring the above-mentioned ADIZ and, when US marines were sent to Darwin, Australia, taking out a 99 year lease on the port of Darwin.

In extracting better cooperation from allies, Trump is likely to succeed, at least partially. Since Japan, which already contributes several billion dollars annually to a so-called sympathy budget that underwrites the costs of US troops on Japanese soil, will plead a depressed economy, negotiations are apt to be difficult. But Abe might welcome the excuse to take a more aggressive stand against China. Many consider the term gaiatsu, literally foreign pressure but actually used to mean pressure from the United States, to be a rationalization for doing what the LDP has been trying to do for decades. At a news conference after his meeting with Trump’s national security adviser-designate Lieutenant General Michael Flynn, Ishiba Shigeru, formerly head of Japan’s defense agency and considered a likely successor to Abe, stated unequivocally that Tokyo should use Trump’s call to change Japan’s defense posture and take on some of the roles currently performed by the US military.¹⁴ The government also announced that it was considering deploying THAAD, which Beijing has argued could be used against it.¹⁵

In Korea, a turning point was reached after President Park Geun-hye failed to reach President Xi Jinping following North Korea’s launch of its fourth nuclear test and decided to accept THAAD, to China’s great displeasure. This reinforced some Chinese analysts’ previously expressed fears that their country’s not dealing with DPRK belligerence would push South Korea closer to the US-Japan alliance.¹⁶ Still, Park’s political problems do not bode well for future cooperation. Any successor will face intense pressure from the country’s left wing to rescind the THAAD agreement as well as an intelligence-sharing agreement with Japan that Park signed just before the firestorm against her erupted.

As for NATO, Secretary-General Jens Stoltenberg has agreed that its members must do more: the United States currently pays 70 percent of the costs, with only four of the other 27 members contributing the benchmark of two percent of GDP.¹⁷ Were Germany to meet that standard, NATO coffers would increase by USD 30 billion.¹⁸

Taiwan

To Beijing’s annoyance, the January 2016 election gave the Democratic Progressive Party (DPP) a solid majority in the nation’s parliament as well as its presidency. President Tsai Ing-wen has refused Beijing’s blandishments to accept an alleged 1992 Consensus in which the ruling political parties of each country (not, at that time, the DPP) declared that they accepted the notion of one China while reserving their differences on what that China was. A major factor in Tsai and her party’s victory had been the feeling that the previous administration had gone too far in linking the island’s economy to China’s, rendering it increasingly vulnerable to pressures from the PRC that would lead to the unification that Beijing has declared one of its “core interests”—widely understood to mean an interest for which it is willing to fight. Taipei has sought membership in the TPP as a way to reduce its dependence on China. Should the pact fail, Taiwan’s economy will become more fragile—a major concern for the overwhelming majority of Taiwanese who oppose unification with China and fear abandonment by Trump.

Participants in a forum held in Taipei a few days after the election agreed that they have never been so unfamiliar with a president-elect. Some felt that, as someone experienced in the art of making deals, Trump would seek to use Taiwan as a bargaining chip in negotiations with the PRC, others that the new president would never sacrifice an area with geostrategic importance as a crucial link against the Chinese navy’s plan to break out of the first island chain into the open Pacific. A third group believed that Taiwan had long ago lost its strategic value to Washington.

So What Should Trump Do…And What Is He Likely To Do?

Most Americans discount promises made during political campaigns: George H.W. Bush famously promised not to raise taxes, then did so; Clinton criticized Bush for coddling dictators from Beijing to Baghdad, then championed the former’s entry into the WTO and entertained its corporate executives at the White House. Trump has already made peace with several establishment figures who opposed him during the campaign and moved away from his rhetoric about sending Hillary Clinton to jail by saying he has no interest in prosecuting her. He has indicated that he will keep an open mind on the Paris Climate Accord. But the populist supporters who voted for Trump are not the Red Guards of China, who could be packed off to labor in the countryside when they had served Mao’s purpose.

How much Trump can make good on his vow to stand up to China is a fraught question. A first step, though largely a symbolic one, is the president-elect’s announcement that he plans to meet with the Dalai Lama, seemingly confounding expectations that Trump would not make human rights abuses a focus of his presidency.¹⁹ In exile in India since 1959 after the failure of a revolt against the Chinese rule of Tibet, the God King has been denounced as a separatist, despite the Dalai Lama’s repeated pronouncements that all he seeks is internal autonomy under the PRC. President Obama met with the Dalai Lama four times, though sympathizers with the Tibetan cause complained that, in deference to Beijing’s feelings, His Holiness was surreptitiously spirited into and out of the White House, with minimal publicity given to the event. Under what circumstances the meeting is to take place remains to be seen. A high-profile meeting, particularly if accompanied by expressions of support for the Tibetan cause, is likely to elicit a strong response by Beijing.

Trump has also taken a telephone call, reportedly pre-arranged by his staff, from the president of Taiwan, during which the two discussed defense and economic issues. On the same day, the House of Representatives passed the 2017 defense budget, which included a section calling for increased defense cooperation with Taiwan and senior military exchanges between the two sides.²⁰ Since such language has appeared in the past before being deleted after the executive branch cautioned that it could damage Sino-American relations, its continued presence will send a strong message to China.

On issues of larger geostrategic significance, some of Trump’s advisers feel strongly that the Obama administration tacitly ceded the South China Sea to the PRC except for occasional freedom of navigation exercises that do not seriously challenge China’s administration of its nine-dash line since the United States does so while claiming the right of innocent passage. This supine attitude, they believe, must stop. As must the atrophy of the armed services that has encouraged China’s expansive activities. Trump has, in fact, pledged to work with Congress to repeal defense sequestration. The navy, considered to be the major source of regional stability in Asia, is to be increased from its current 274 ships to 350, with upgrades to the air force planned as well, according to plans being aired. An enhanced US presence will enable routine freedom of navigation patrols—without claiming the right of innocent passage.

Other changes in policy that fall below the level of belligerent behavior should include measured responses to PRC slights and provocations. If there is a repetition of the PRC’s cancellation of a long-scheduled visit of a US aircraft carrier to Hong Kong, the carrier should be rerouted, perhaps to Singapore or to Taiwan’s naval port at Tsoyi. China’s invitation to participate in the annual Rim of the Pacific (RIMPAC) exercises should be withdrawn. And military-to-military contacts should be suspended. Arms sales to Taiwan, which are mandated under the Taiwan Relations Act of 1979 but often tardily executed, could be speeded up. It takes no great imagination to expect similar responses to China’s slights to a deplaning president attending an international conference and rude treatment of his national security adviser. Our allies’ trust in America’s commitment to security would be reinforced.

If America’s allies will be reassured, how is China apt to react? In a letter to Hong Kong’s South China Morning Post, James Woolsey, former director of the Central Intelligence Agency and Trump foreign policy adviser, suggested a grand bargain in which the United States would accept China’s political and social structure and commit not to disrupt it in any way in exchange for China’s commitment not to challenge the status quo in Asia.²¹ However, as China’s flat refusal to accept the rulings of the Permanent Court of Arbitration on the nine-dash line, make clear, it intends to define the status quo its own way.

President Xi Jinping, the strongest leader China has had since Mao Zedong, has vowed to realize a somewhat nebulously defined “China Dream.” His vow to return China to a re-imagined vision of its past primacy in the world sounds eerily similar to Trump’s pledge to make American great again. As summed up in an ancient Chinese expression, there cannot be two suns in the sky. This does not bode well for a grand bargain. Internationally, Xi has challenged the status quo and made clear that he intends to establish a new rules-based order in which China defines the rules. The military buildup continues unabated; its salami tactics have been slowly changing the status quo and are unlikely to change in the future. Revival of alleged silk routes, overland and maritime, centered on Beijing and the creation of financial structures like the Asian Infrastructure Investment Bank (AIIB) bespeak an intention to establish an alternate economic order as well. Domestically, thousands have been arrested on charges of corruption that seem suspiciously focused on his enemies. Human rights advocates have been arrested, as have the lawyers who would defend them; there are tightened restrictions on academic freedom. None of this indicates that Xi would be amenable to recognition of the status quo.

As one who considers himself a master of the art of the deal, Trump should realize that bargains can be reached only when one has trust in the other party. Thus far, Xi Jinping has not shown himself worthy of that trust. There will be a period of testing, as each side tries to feel the other out. It is likely that Beijing will challenge the new president. Trump should be prepared to respond in kind, lest he, like Obama, be found wanting.