Riding the fire horse
US-China relations after Trump’s visit
🔸Donald Trump’s visit to China was a significant event even if summing up the outcome is a challenge. Originally, the visit was supposed to start on March 31, so there has been a 6 week delay. Even if the last presidential visit to Beijing took place 9 years ago (08/11/2017), this one is just one in a series, unlike the real historic visit by Richard Nixon in 1972 (21-28/02), which was an ouverture for the strategic rearrangement of international politics and opened the way to the invention of China’s reform driven growth model as well. In itself it is a positive outcome that another G2 summit was announced to be held in Washington in about 4 months time.
🔸Contemporary relations between the US and China are often framed in the so-called Thucydides Trap, which is the ancient Greek model of an inevitable clash between a rising power and a declining one. How to avoid falling into the TT was openly discussed during this US—China summit as well, including by President Xi Jinping. Theoretically, the US is the declining and China is the rising great power today. For nearly 2 decades, it has been understood that US foreign policy would pivot to Asia and handle the Chinese challenge with priority. If anything was signalled by this visit, it is the strategic stalemate between the two.
🔸The top issue of the US—China security conflict is the question of Taiwan, which has been feared to become once a flashpoint for an open conflict. Though in different ways, both sides preferred to sideline the issue, with the exception of Marco Rubio who made some general statements from the side. Deflecting the Taiwan question by both Xi and Trump signals that, for the time being, this seems to be the safest way to ensure that the conflict remains frozen. If Beijing’s actions remain in the domain of diplomacy and deepening economic cooperation, while Washington refrains from provocatively sending more arms, the risk of an escalation can be kept at a low level.
🔸As opposed to Taiwan, Iran is currently a hot war in which the US is directly and China is indirectly involved. Rhetorically, both leaders expressed their wish to see the Strait of Hormuz to be reopened, and Iran not to develop a nuclear bomb. But their respective roles in creating the current crisis are completely different, and China would not help Trump to sell the US public (and the rest of the world) any kind of success, let alone victory, after the mindless destruction that has been carried out since the end of February. Nevertheless, they share an economic interest to find the exit fast.
🔸Trump was accompanied in China by a delegation of the most powerful businessmen of the USA (representing Tesla, Apple, Boeing, Meta, Mastercard, Visa, Goldman Sachs and Micron among others). In the last decade, Chinese spending on American products has halved, which is a trend Washington seeks to reverse. Chinese purchases of beef and Boeings were announced as part of the summit, and technology was subject of further discussions (from microchips to artificial intelligence). The two presidents agreed to establish a Board of Trade as well as a Board of Investment, which would open a pathway to more trade in the months and years to come.
🔸Since the second Trump administration entered office 20 months ago, trade deficits in bilateral relations have been in the focus of their actions, especially that of the Trumpian trade wars. While Trump’s aggressive tariffs were meant to tame Chinese exports to the US, the last one year saw Chinese purchases of American exports dropping by 25 percent. The US trade deficit vis a vis China has shrunk, while it has increased vis a vis ASEAN countries. Meanwhile both the US and China have their underlying macroeconomic imbalances. The US is well known for its astronomic public debt but Chinese debt has actually grown faster in the recent decade.
🔸While both US and China have behind them a period of debt driven growth, in Europe Mario „Whatever It Takes” Draghi’s messages prescribing joint borrowing for the EU to finance innovation and investment remain unheeded. The former ECB President delivered another speech, this time in Aachen (Germany) on the occasion of receiving the Charlemagne Prize or Karlspreis (14/05). German Chancellor Friedrich Merz wasted no time to contradict Draghi, thus presenting himself as the main roadblock in the way of economic competitiveness in Europe. Turning the G2 into G3, with the involvement of the European Union, is not on Berlin’s agenda.