Tuesday, May 21, 2024

Across trade, tech and defence, the US-China conflict is back and here to stay

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WASHINGTON: At the Rose Garden in the White House, on Tuesday morning, just hours after his administration decided to impose and increase tariff rates on a range of Chinese imports, US President Joe Biden explained the rationale of the American position.

US President Joe Biden tariff announcement and his tone on Tuesday reveal that the overall thrust of the relationship with China remains deeply adversarial. (AP FILE)

“For years, the Chinese government has poured state money into Chinese companies across a whole range of industries: steel and aluminium, semiconductors, electric vehicles, solar panels — the industries of the future — and even critical health equipment, like gloves and masks,” Biden said. China “heavily subsidised” these products; it pushed its companies to produce more than the world could absorb; and it then dumped “excess products onto the market at unfairly low prices, driving other manufacturers around the world out of business”, the US President said at the event where HT was present.

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And then he pointed to a range of “anti-competitive tactics” such as “forcing” American companies to transfer their technology to do business in China. Claiming he had told Xi Jinping to “play by the rules”, Biden added, “Sometimes they just outright steal through cyber espionage and other means. When you make tactics like these, it’s not competition. It’s cheating.” And that is why, the US President said, his administration was imposing these new tariffs — 25% on steel and aluminium, 100% on electric vehicles made in China, 25% on EV batteries, 25% on critical minerals that make the batteries, 25-50% on solar panels, 50% on semiconductors and more.

The tariffs appear motivated by two impulses. The first is a signal to American businesses and workers that the administration won’t let China outcompete them, especially in the backdrop of Donald Trump’s track record of initiating the trade war with China and his promise of an across-the-board tariff increase if re-elected to power (which the Biden team warns will have inflationary consequences). But the decision is also meant to protect and prepare American industry for the green and emerging tech sectors, reassure Americans that the transition to green need not mean joblessness (even as Trump warns that Biden’s EV push will destroy America’s auto industry), and reduce dependence on a single geography.

In recent months, there has been focus on America’s enhanced engagement with China. And indeed, there is enhanced engagement with both Secretary of State Antony J Blinken and Secretary of Treasury Janet Yellen visiting Beijing this year, as a part of the follow up on Xi’s visit to California for a meeting with Biden in California last November. There is a separate track between Biden’s national security advisor Jake Sullivan and Chinese foreign minister Wang Yi. But all of this engagement, the official American position makes it clear, is an effort to “responsibly manage competition” and work in select areas such as resuming high-level military-to-military communication, counter-narcotics, and rules and norms on artificial intelligence safety. With Xi focused on China’s internal economic recovery, and Biden focused on two wars in Ukraine and West Asia, this engagement and a tactical calibration is in mutual interest.

But as Biden’s tariff announcement and tone on Tuesday reveal, the overall thrust of the relationship remains deeply adversarial. And the evidence of that is reflected as much in the strategic and technology domains externally and political domain internally as in the economic and trade domain. Take just three other instances of this competition and why viewing US-China engagement as any kind of reset between the major powers is a mistake.

The first is the increasingly public position that the US has taken in telling the world that China’s assistance has been among the central factors in helping Russia tilt the balance on the battlefield in Ukraine.

At a recent Senate hearing, where HT was present, America’s top intelligence official, Aviral Haines, told lawmakers that China’s provision of dual-use material has helped Russia reconstitute its defence-industrial base. Biden, in a call with Xi earlier this year, warned China against doing so. This was also a part of the conversation between Blinken and Wang Yi. In early May, the US treasury department imposed sanctions on a range of Chinese entities for providing support to Russia for its war — and future punitive actions can’t be ruled out. It is clear that on one of the biggest strategic questions of the times that animates the US — the Russian invasion of Ukraine — Washington and Beijing are on opposite ends.

Two, there has been a new lease of energy, largely driven by Biden’s former National Security Council (NSC) Indo-Pacific czar Kurt Campell’s appointment as the Deputy Secretary of State, in energising and creating new groupings in East Asia to strengthen deterrence against China.

In the past two months, the US hosted Japan’s PM Fumio Kishida for a state visit and elevated the bilateral relationship in the defence and tech domains. The PM also addressed the US Congress where he explicitly spoke about the threat from China, drawing applause from both sides of the political spectrum. The US has hosted a trilateral summit for the first time with Japan and the Philippines, especially at a time when Beijing’s belligerence against Manila has increased in the maritime domain. Defence ministers/secretaries of “Squad”, a grouping that refers to the US, Japan, Philippines and Australia met in Hawaii earlier this month, just a month after their four navies held joint exercises. While this year’s Quad summit may not have happened yet, a Quad foreign ministers’ meet is likely in Japan later in the summer after the Indian elections. There has been movement on Aukus, the trilateral nuclear submarine pact between Australia, US and the UK. Taiwan remains the most contentious subject in the relationship with US reinforcing its support and China building its capabilities, both aware that a future conflagration is possible within this decade. On Tuesday, Biden himself referred to this wider regional strategy and said, “I have revitalised our partnerships with the Pacific allies in India, Australia, Japan, South Korea, the Philippines — Pacific Island nations.”

Three, in the domain of tech, even as US officials such as top NSC tech official Tarun Chhabra engage with Chinese officials on AI safety just this week in Geneva, the US has been focused on preventing China from accessing technologies that can be used to gain a strategic advantage especially when it comes to national security. The export restrictions imposed on October 7, 2022 to constrain China’s ability to access high-end chips, tech and equipment remain in place. The US then worked with the Netherlands and Japan, key players in the chips supply chain, to impose restrictions. In August 2023, the US restricted outbound investment for semiconductor investment, quantum and AI in “foreign countries of concern”. Last week, the Financial Times reported that the US department of commerce had “revoked export licences that allow Intel and Qualcomm to supply Huawei with semiconductors”; this will affect the supply of chips for the Chinese giant’s laptops and phones. And the US Congress has just passed a legislation that effectively tells TikTok that it either needs to have a new owner or face a ban in the US market.

Now place all of this — the trade wars, the confrontation over Ukraine and sanctions, the continued divergence in the Indo Pacific, the tech restrictions — in the context of America’s domestic politics where standing up to China and seeing to stand up to China is now a matter of intense competition. Donald Trump, rightfully, takes credit for having ended the American romance with China and taking steps to constrain its capabilities and reduce US economic dependence — he also accuses Biden of doing too little and selling out to Chinese interests. Biden’s team, rightfully again, takes credit for introducing a more methodical, thoughtful, consultative approach to take on China along with allies and partners while maintaining responsible engagement to prevent a conflict — and it views Trump as reckless and inconsistent. Either way, and irrespective of who wins this year’s presidential election, what’s clear is that the US and China are locked in a conflict that’s here to stay. The engagement is limited and superficial, the conflict is deep, bipartisan and structural and no American politician is going to walk back from that reality any time soon.

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