As Asia Unhedged forewarned last week at the outset of the US-China Diplomatic and Security Dialogue, the Trump administration is prepared take a harder line on other issues if Beijing doesn’t take more action to reign in Pyongyang. Three senior Trump administration officials said this week that the president is becoming impatient regarding Beijing’s efforts on North Korea, which are perceived by Trump as inadequate, and is considering trade actions.
Among steps being considered, the only specific move indicated by the officials was a tariff on steel imports. Commerce Secretary Wilbur Ross has already said the steel restrictions were on the table, pending the findings of a national security study.
“What’s guiding this is he ran to protect American industry and American workers,” one of the unnamed officials told Reuters, in reference to Trump’s harsh rhetoric on the US-China trade relationship during his election campaign.
Regarding China’s efforts on North Korea an official added that “they did a little, not a lot. And if he’s not going to get what he needs on that, he needs to move ahead on his broader agenda on trade and on North Korea.”
Coinciding with the shift in tone towards China from the White House was this week’s state visit from Indian Prime Minister Narendra Modi, which gave the US a chance to affirm its strategic relationship with China’s rival. Raising some eyebrows in Beijing, Washington approved the sale of US$2 billion of unarmed drones to help surveil the Indian Ocean.
“Some people in China are a little concerned,” Peking University School of International Studies professor Han Hua said of the defense deals. “It will increase India’s capability to have a view over the entire Indian Ocean. That is more symbolic than the F-16 joint production.”
Speaking during Modi’s visit, Trump made a point to highlight joint naval exercises, saying “our militaries are working every day to enhance cooperation, and next month they will join together with the Japanese Navy to take part in the largest maritime exercise ever conducted in the vast Indian Ocean.”
Writing this month in Foreign Policy, president of the Council on Foreign Relations Richard Haas was complementary of the Trump administration’s China policy, essentially advising to stay the course. He noted, rightly so, that the US and China’s economic integration gives both countries a stake in smoothing over disagreements, and that emphasizing North Korea above all else is necessary:
“That means leaving in place long-standing US policies on bilateral issues such as Taiwan, trade, arms sales, and the South China Sea; the Trump administration should avoid adopting positions on these issues that could either trigger a distracting crisis or compromise US interests. The result would be a ‘North Korea first,’ but not a ‘North Korea only.’ US policy toward China.”
Judging by the way US-China ties have moved during the current administration, Haas’ endorsement of a “North Korea first” China policy clearly echoes the opinion of the White House camp that has prevailed thus far. How likely is it that Trump would pivot away from this wing of his administration to those calling for him to take a harder line on trade?
With regard to steel imports, investors seem unsure whether Trump will follow through on his threat to raise tariffs, with the release of the steel investigation’s finding expected this week. Shares of US Steel and AK Steel Holding were rising Tuesday in the early afternoon on speculation that tariffs were coming, only to close down 1.06% and 0.61%, respectively.
If the administration were to levy the tariffs it seems clear that China would be one of the likely targets. However, pushback from the top steel exporters to the US, including allies such as Canada, Japan and the European Union would be forceful, as the EU warned Tuesday. China is only the eleventh-largest steel exporter to the United States.
Despite this rampant steel tariff speculation, Trump’s prior behavior indicates it is not a foregone conclusion. In April, not long after the president’s first meeting with Xi Jinping, which unexpectedly ushered in a recent high point in US-China relations, calls from the presidents of Canada and Mexico were all that it took for Trump to back down from threats to back out of NAFTA. It is possible that China will be able to smooth things over with smaller concessions on trade.
The worry here, though, is that China will never go as far as the US would like in sanctioning North Korea. Even with the threat of compromising the US-China trade relationship, China’s prescription for dealing with North Korea through talks, which by Beijing’s account should result in concessions from both sides, will never align with that of the US, which frames the issue as one-sided.
Still, two simple reasons to believe calmer heads will prevail in the White House have not changed. As Haas noted, and as Trump has hopefully come to realize since taking office, the largest two economies in the world are too integrated to allow for a trade war. Washington also needs to find a creative way to work out a deal with North Korea and they need Beijing’s help.