August 26, 2019 / 9:00 AM / 4 months ago

Breakingviews - Trump containment talk hardens Beijing hardliners

U.S. President Donald Trump delivers remarks on supporting the passage of the U.S.-Mexico-Canada (USMCA) trade deal during a visit to Derco Aerospace Inc., a Lockheed Martin subsidiary, in Milwaukee, Wisconsin, U.S., July 12, 2019. REUTERS/Carlos Barria

HONG KONG (Reuters Breakingviews) - Donald Trump’s containment talk will harden Beijing’s hardliners. The U.S. president on Friday announced additional 5% tariffs on some $550 billion of Chinese imports, and told American companies to explore relocation. He also said he will make sure the American economy stays larger than China’s. It can only feed Beijing’s suspicions that the real goal of the United States is holding the People’s Republic back.

Trump rolled out the new duties just hours after Beijing announced tariffs on about $75 billion of American goods. The fresh hike alone is likely to knock another 0.1 percentage points off China’s GDP growth, analysts at Nomura estimate. The dent to broader business confidence and investment could make the figure much larger.

As alarming was the president’s accompanying rhetoric. “We don’t need China and, frankly, would be far better off without them,” Trump said on Twitter, adding that American companies are “hereby ordered” to look for alternative countries to set up shop, including back at home. The U.S. economy, he said, is “MUCH” larger than China’s: “We will keep it that way!”

Trump’s comments tend to lurch between extremes. Just days earlier, for instance, he had bragged about “doing very well” with China. Nor is this the first time he’s made noises about U.S. companies moving back home. But many in Beijing will take these blunt comments at face value. For years, the not-so-secret focus among mainland strategists has been the so-called “Thucydides Trap.” The idea is that when a rising great power such as China begins to overtake an existing one, such as the United States, the result is conflict.

Trump’s latest comments reinforce concerns in Beijing that the American administration is losing interest in finding a deal that addresses the practical concerns of its business and security communities. To them, it looks like the White House is turning to forcibly decouple the two economies, while seeking to contain China’s rising financial, diplomatic and military power. Trump’s promise to make sure China stays smaller than the U.S. economy fits right into the arguments of officials who push for a tougher line with the United States, because they believe conflict may be inevitable.


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