In an early sign that President-Elect Donald Trump may stick to his campaign promises to shake up the U.S.’s relationship with China, Trump took a call from Tsai Ing-wen, the president of the Republic of China, also known as Taiwan.
While a simple phone call between two leaders of nations might be viewed as a common courtesy by some, this call carried with it much diplomatic weight.
Technically, China considers Taiwan a rogue province rather than a separate nation. Just like North and South Korea, China and Taiwan are technically still in a state of war, with no peace agreement or armistice having been signed between the countries.
Since 1979, the U.S. has had a formal diplomatic relationship only with China, which was bolstered in 2001 after U.S. President Bill Clinton helped China to enter the World Trade Organization (WTO).
After that important development, exports from China to the U.S. began to increase at a significant clip, and the outsourcing of U.S. manufacturing to China surged quickly. Since 1992, more than one-third of all U.S. manufacturing jobs have fled American borders, and China has been one of the greatest beneficiaries of this outflow. The U.S.-China trade deficit currently stands at $365.7 billion in favor of China.
Rather than placate the Middle Kingdom, as China calls itself, Trump desires to re-establish American sovereignty and trade barriers. He wishes to enact high tariffs that would encourage American companies to return some of their manufacturing to the United States, resulting in renewed job opportunities for American production workers.
Trump also wants to discourage China from manipulating its currency, another source of the massive trade imbalance between the two nations. When Chinese currency is artificially cheap, Chinese components and labor become irresistibly attractive for American companies, and American money flows overseas to Chinese firms.
In these cases, China exports more than it imports; it earns more than it normally would. Some economists say the Chinese yuan may be as much as 20 percent undervalued. Because China is a member of the International Monetary Fund (IMF), this practice is technically outlawed.
“[China] is using our country as a piggy bank to rebuild [themselves],” Trump declared recently. “We have a lot of power with China. We can’t continue to allow China to rape our country, and that’s what they’re doing,” he said in a campaign speech earlier this year in Ohio.
If Trump were to formally accuse China of manipulating their currency and affecting trade to the WTO, it could set off a trade war the likes of which has never been seen.
More likely, what will happen is that Trump will formally accuse China of manipulating its currency before Congress. Congress will then be able to retaliate using tariffs. Whether China is indeed keeping the yuan artificially low is not in question, but trading moves with the People’s Republic must be carefully considered before they’re enacted.
Some observers say that simply the threat of enacting tariffs may force China to change its behavior. Up until now, many U.S. companies making their goods in China did not want the current trading relationship between the countries jeopardized; the cost of Chinese labor is still much more attractive than the U.S.’s.
China has also taken severe actions to tilt the economic playing field to its advantage in terms of ignoring international environmental standards, to the detriment of its citizens’ health and possibly to the world environment at large. By now, most Americans are familiar with images of Chinese cities so thick with air pollution that people are discouraged from going outside because of real risks to their well-being.
This a result of purposeful elimination of environmental controls for industry, allowing China to produce goods and materials more cheaply and efficiently than nearly any other country. Because the U.S. would never allow its own factories to pollute on a similar scale, it cannot compete industrially with such a nation.
There are also other factors to consider outside of economics. The Chinese buildup of military forces and claiming of new territory in the South China Sea (which an international tribunal at The Hague has called illegal) has threatened to destabilize the region.
There have been close calls and even a collision between Chinese jets and American surveillance planes in the last few years. Through the Taiwan Relations Act of 1979, the U.S. is mandated to come to Taiwan’s aid in the event that the smaller nation is attacked by China.
Rumblings of the possibility of American normalization of relations with Taiwan would represent a huge shift diplomatically that could have military consequences. There are many reasons why the U.S. needs to maintain a good defensive relationship with China, not the least of which is nuclear saber rattling by China’s eastern neighbor North Korea. We rely on China to put pressure on the Hermit Kingdom, a dependency which may be increasingly relevant in the future as the capabilities and ranges of North Korean missiles increase.
There are also accusations that China has been hacking computers and networks of American corporations and its defense establishment. In some cases, the hacking has been traced back to specific buildings in Chinese cities. This is in the face of U.S. tech companies desiring increased access to Chinese consumers and markets. Facebook, for instance, has announced plans to develop news censorship tools that would see its website made available to Chinese citizens, who it’s currently banned from under existing government regulations.
For now, China has called the phone call between Ing-wen and Trump a “little trick” that Taiwan played on the U.S. But China certainly will not be able to ignore the barrage of tweets Trump turns out on a regular basis that mention the Asian nation.
From a political candidate, those tweets may mean one thing, but from a sitting U.S. president, they take on greater importance. Just the fact that Trump referred to “the president of Taiwan” in one of them is offensive to the Chinese, who insist that they unconditionally rule over the smaller nation.
Vice President-Elect Mike Pence suggested that the phone call did not represent any shift in U.S. policy. “It was a courtesy call,” he insisted to NBC’s Meet the Press. For now, China is taking a “wait-and-see” position regarding Trump’s next moves. But should he be as cavalier as he’s suggested in the past, the diplomatic ride with the Communist regime could get rougher.