Trump's Chinese Puzzle

What is Donald Trump's policy towards East Asia? We can view this thorny question through the twin lenses of trade and security. On the campaign trail, Mr Trump espoused his views on East Asia mainly in terms of trade. He expressed the view that China had gained an unfair advantage over the US through currency manipulation, and that China had stolen jobs from the manufacturing heart of America.

There are grounds to suggest that both of these statements have a grain of truth in them. The Chinese Yuan has been pegged to the US Dollar for many years. It currently enjoys a managed float against the US Dollar, and has helped to maintain a large trade imbalance between the US and China. The Chinese trade surpluses with the US have been largely used to amass holdings in US Federal debt. Mr Trump says that he wishes to take action against this.

In his statements, Mr Trump appears to be a mercantilist at heart. He speaks against trade arrangements with China that he sees as 'unfair', and he feels that American trade partners - mainly located in East Asia - enjoy a situation that is too much to the detriment of the US. This has led him to state that, on his first day of office, he will cancel the participation of the US in the Trans-Pacific Partnership (TPP).

The TPP was an attempt by the US to create a free trade area in the Pacific Rim in it's own image. It would allow America to dominate the conversation on trade well into the twenty-first century. By being such a large part of the TPP, and by making, perhaps, the most concessions on trade, Washington would have created a Pacific economic zone in it's own image, much to it's long term benefit. President Elect Trump is unwilling to pay that price. He, along with the American people, have opted for the short term gain from protectionism.

Cancelling US involvement in TPP, however, also has a number of spin-off effects because TPP is not only about trade. Whilst much can be said against President Obama, his administration does have a firm grasp that trade provides the mortar that binds the building blocks of security. Not only would TPP have established a free trade zone in the Pacific Rim, it would form the modern basis of a security counter-weight against more aggressive Chinese expansionism in the area. Those East Asian countries who are parties or interested parties to TPP must now be wondering exactly how much their security guarantee from the US is worth.

There are two ways of looking at this. From the perspective of China, ought this withdrawal of the US from it's 'Asian Pivot' embolden China in expanding it's influence in the region? From the perspective of the East Asian nations, ought they become more accommodating to an expansionist China and less accommodating to a withdrawing America? There is a good case for both to occur, for China to be encouraged and for the other East Asian nations to be less accommodating to a protectionist US.

This creates Trump's Chinese Puzzle. How can President Trump, when inaugurated, maintain both a protectionist trade stance whilst maintaining the East Asian security guarantee?

Stephen Aguilar-Millan

© The European Futures Observatory 2016