Business & Leadership

Trump Turns the Screw on Beijing

In framing China as not merely an economic rival to best, but as a clear and present danger to the US, Donald Trump has upended the established political and economic world order, threatening the stability of the American economy and those of Europe, among others. Yet the high-stakes game he is playing has obvious political benefits for the American president in terms of popularity as, by adopting his extremely tough position against Chinese telecoms company Huawei, the president pleases his base by keeping a key campaign promise. However, behind the protectionist grandstanding, the suspicion remains that the real motive are geopolitical rather than economic.

© PAS China

In framing China as not merely an economic rival to best, but as a clear and present danger to the US, Donald Trump has upended the established political and economic world order, threatening the stability of the American economy and those of Europe, among others. Yet the high-stakes game he is playing has obvious political benefits for the American president in terms of popularity as, by adopting his extremely tough position against Chinese telecoms company Huawei, the president pleases his base by keeping a key campaign promise. However, behind the protectionist grandstanding, the suspicion remains that the real motive are geopolitical rather than economic.


Among the many promises Donald Trump made on the campaign trail in 2016, one of the most potent was his promise to stand up to China. He has remained true to his word. For more than a year and a half Trump has waged war on the notion of free-trade, and Beijing has been firmly in his crosshairs. Needless to say, the Chinese have not taken this lying down. A tense situation, which had been simmering for some time, threatens to boil over now Trump has labeled Huawei “a company that poses a threat to US national security.” With this designation, US companies are banned from doing business with the Chinese firm – officially for espionage reasons – and this could prove disasterous for the fortunes of the world's second-biggest smartphone manufacturer. China’s response promises to be robust, which could see a large-scale trade war develop between the two economic giants, the fallout from which would be keenly felt in Europe. How has it come to this and might America be shooting itself in the foot?    

 

Make America Great Again

For Paris-based historian and keen America-watcher François Durpaire, the move reveals more about Trumps political ambition than it does his economic strategy. “This battle of wills is more than a mere fight for economic or technological supremacy. We are at a pivotal moment in the relationship between the world’s only superpower and its emerging geopolitical rival,” says Durpaire. “Trump will not countenance a post-American world.” One, in other words, where America’s hegemony is threatened. “Donald Trump does not want a world where the United States plays second fiddle to China, or even India,” explains the historian, who recalls that Trump’s entire presidential campaign rested on the promise to make America great again. “Behind all the protectionism is the core goal of ensuring that America remains number one.”

 

Re-election bid

In order to do this, Trump has unsurprisingly chosen the stick rather than the carrot. On the one hand, this is because he is doing what he feels comfortable doing – playing hardball. But it is also what his base expects of him, according to Durpaire, who believes that with this episode we are witnessing the start of his re-election campaign. “It’s clear that with this move Donald Trump has his eye on winning a second term in the White House. He is making America’s economic policy toward China a key election issue for 2020,” assesses Durpaire for whom the president’s battle with China is above all about sending a strong message to the American electorate. “With his China policy, Trump is saying ‘I am pro-active, I stick to my guns and keep my promises.” Translation: he is positioning himself as the president who has done what his predecessors would not, what neither his own party nor the one across the aisle was prepared to do, and fight back against China. “The message is: ‘everyone who came before me sold America down the river, but no more! I am re-establishing borders and protecting American business.”

 

Political tool

“Donald Trump uses the economy as a political tool,” continues the historian, “for him everything comes back to America’s place in the world.” And even if his policies cause pain for American businesses in the long run, the effects so far have been limited. According to the American Chamber of Commerce in China, only 6% of American businesses based there are currently thinking about relocating to the United States. With those kind of numbers, it would seem to be a sensible political gamble. “Trump’s approval rating is currently at 48%. He has the political capital to pull this off and get re-elected.”

In the meantime, it’s clear that the confrontation will send waves of uncertainty through the global economy and will lead to fears of a new cold war. It has become difficult for governments around the world to shrug and say ‘there’s only one more year of this to take’ because, despite what the opinion polls say, Trump could well win a second term in office off the back of this issue. And that would mean Trump-style politics are here to stay.

 

 

 

Caroline Castets

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Accenture's CEO and CFO interview by Leaders League Group

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