Game, Set and Match, China?

There had been earlier skirmishes, threats, talk of retaliation and warnings of dire consequences, but the trade war between the United States and China started in earnest on July 6, 2018 when Washington implemented its first China-specific tariffs.

It ended just short of a year later. Although Chinese officials are too polite to publically proclaim victory, from their point of view the outcome can be viewed in a favorable light.

At first glance, it hardly seemed a telling blow. No trumpets sounded, no flags were lowered, no treaties signed. But in a meeting on the sidelines of the G-20 summit in Osaka, Japan, U.S. President Donald Trump and Chinese President Xi Jinping agreed to resume trade talks that had broken down in May.

So what, you wonder? That’s hardly a surrender, just a brief lull — a pause before hostilities re-commence? No. This is a moment of far more significance and one that many in the West do not fully appreciate.

A defining moment in U.S.-China relations

If the deal had been just to postpone tariffs Trump had threatened to impose on an additional $300 billion annually in Chinese imports, then it could be considered a strategic retreat.

After all, Trump will not overhaul the relationship with the world’s second-biggest economy as the 2020 election looms.

But two developments have occurred that alter the picture. The first is the lifting of certain commercial restrictions in the United States on Huawei, a company that is seen in Washington as a Trojan Horse for the Chinese military.

The second is the reports that the Trump administration will allow North Korea to keep its nuclear weapons.
This suggests a more defining moment has arrived. The Chinese have always denied that Huawei has links to its military. But then they would say that, wouldn’t they?

However, it is important to note from the Chinese perspective that the Chinese believe many U.S. companies operating in China have links to the U.S. military.

After all, did not Eisenhower warn in his 1961 farewell presidential address of the threat posed by the industrial military complex? Given the immense expansion of the U.S. defense budget, it certainly hasn’t lessened since then.

First the ZTE climbdown, now on Huawei

This is a major reversal by Washington who had told its European allies, especially Britain, that any dealings with Huawei would endanger defense ties.

Just in May, U.S. Secretary of State Mike Pompeo warned London to prioritize its security interests and those of its allies when dealing with Huawei. He even hinted that the U.S. government could re-consider some of its extensive defense and economic interests in the UK.

This is notably the second time the Trump administration has backed down with a Chinese tech giant.

In June 2018, about the time the trade war started, the U.S. Commerce Department lifted a ban on selling components to Chinese firm, ZTE Corps which had been accused of violating sanctions against Iran and North Korea. It coughed up more than $1 billion in fines. That came after a personal appeal from Xi to Trump.

ZTE was kept in business, according to the White House, as a favor by Trump to Xi and to get the Chinese leader’s help with North Korea.

That explanation elicits a wry smile in Beijing and an “if that’s what they say” shrug of the shoulders.

The path to any deal with Pyongyang obviously goes through Beijing. In the Chinese capital, it stretches credulity that Xi would offer his services on North Korea just in exchange for helping ZTE.

But the Trump administration may read it just this way, which would explain why Trump climbed down both on ZTE and Huawei.

While Trump’s references to “national security” turned out to be soft indeed with regard to China, that must have some of his major Western allies cringe.

After all, not only has Trump used the same “national security” argument with regard to justifying harsh U.S. unilateral moves in general trade relations with those nations.

Unlike as he has done with China, Trump doesn’t seem to be prepared to let go off that argument – even though the national security concerns with ZTE and Huawei were much more palpable.

Acquiescence on North Korean nukes

North Korea seems less clear cut, but the genie is out of the bottle here as well. The United States aiming for denuclearization is apparently over.

John Bolton, Trump’s national security adviser, dismissed media reports that claimed the Trump Administration was considering negotiating a nuclear freeze by North Korea, rather than complete denuclearization.

Trump said in March that “North Korea has an incredible, brilliant economic future if they make a deal, but they don’t have any economic future if they have nuclear weapons.”

But crucially, North Korean leader Kim Jong-un believes that he can have both a developing relationship with the United States and maintain his nuclear arsenal. Otherwise, a nuclear freeze would not be on the table. This is the other major climbdown on the part of the Trump Administration.

What about Beijing’s view?

Beijing may not like Kim, but it views a stable and more prosperous North Korea as vital for its own security.

And China knows that, when dealing with Trump, the art of the deal is not boasting about it.