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US-China conflict moves into danger zone

US President Donald Trump and Chinese President Xi Jinping at the 2019 G20 Summit in Osaka, Japan. REUTERS. US President Donald Trump and Chinese President Xi Jinping at the 2019 G20 Summit in Osaka, Japan. REUTERS.
In a sharp escalation of the bilateral conflict in recent weeks, President Donald Trump's administration has taken new steps to hobble Chinese tech champion Huawei, closed the Chinese consulate in Houston, and sent Health and Human Services Secretary Alex Azar to Taiwan on the first cabinet-level visit to the island in six years, among other measures. Caught off guard, the Chinese have countered some of these actions—for example, closing the US consulate in Chengdu—and are now thought to be preparing a more comprehensive response. Relations are likely to continue to deteriorate ahead of the US presidential election in November, and though still unlikely at this point, the possibility of some type of diplomatic or military crisis has emerged.

US election driving deterioration

Since May, the president has fallen further behind Democratic candidate Joe Biden in the polls, largely because of his handling of the coronavirus, which has made him more willing to lash out against China in an effort to distract from his failings at home. Trump is not inclined to exit the phase one trade deal between the two countries, but he has clearly lost interest in it as a foreign policy win, and it has little salience on the campaign trail. Moreover, as the probability of Trump's reelection has fallen, China hawks in his administration have seized on this time as potentially their last chance to push through tough measures against Beijing. For some, particularly economic adviser Peter Navarro and Deputy National Security Adviser Matt Pottinger, the motivations are likely mostly ideological: They want to cement aspects of US-China decoupling in ways that a potential Biden administration would find difficult to undo. For other officials, particularly Secretary of State Mike Pompeo—who may aspire to run for president in 2024—political motivations are also likely at work. Pompeo has seized center stage in the China offensive in recent months, ordering the closure of China's consulate in Houston, delivering a harsh speech that came close to calling for regime change in China, and levying sanctions against China over Hong Kong and Xinjiang. Whatever his mix of motivations, Pompeo has cast the fight against the Chinese Communist Party in starkly ideological terms in an effort to build his credentials as a cold warrior.

What comes next

A continued steady stream of tough actions by the US is likely. These may include: placing leading Chinese tech firms such as Semiconductor Manufacturing International Corporation and others on the Commerce Department's Entity List to restrict their access to the technologies they need for their products; a diplomatic offensive by Pompeo that would further constrain the activities of Chinese officials in the US (for example, another consulate closure); and more sanctions against Chinese firms and officials over Xinjiang, Hong Kong, and Iran. China's response is a little more difficult to predict as authorities there are grappling with a difficult calculus. On the one hand, they are wary of taking actions that could be seen as interfering in the US election or that could derail the economy's timid recovery from the coronavirus crisis. But on the other hand, efforts to whip up patriotic sentiment at home to counter criticism of Beijing's handling of the virus, as well as the need to establish some sort of deterrence, are raising the pressure on officials to respond. China will probably continue to favor relatively targeted measures, but of a greater magnitude than in the past—if only to keep up with greater US aggressiveness. It seems likely, for example, that China will finally announce some form of retaliation against one or more US tech companies for accumulated anger over measures taken against Huawei, Bytedance/Tiktok, Tencent/WeChat, and leading artificial intelligence companies. Such retaliation could take place under the auspices of Beijing releasing an initial and circumscribed version of a long-threatened “unreliable entities list.” A corollary to the US Commerce Department's Entity List, the Chinese version would set restrictions on named companies—most likely tech firms—selling into China's market or potentially accessing Chinese materials.

Diplomatic or military crisis

Though still unlikely, the possibility of a more serious clash between the two global powers has emerged in recent weeks. In one potential scenario, an accident between their two militaries could result as the US steps up freedom of navigation operations in the South China Sea and Taiwan Strait. If a collision occurs, structures that were created for encounters at sea during Barack Obama's administration would likely be followed by both militaries; currently there is decent communication between the US and Chinese defense departments. But in a crisis environment, the willingness of both sides to take a diplomatic offramp may decrease owing to the greater volume of tit-for-tat action in other areas and higher than normal nationalist sentiment. Another risk is that, as US hawks in China gain ground, they could push an agenda that takes advantage of Trump's “America first” approach that has caused concerns among some regional allies that the US is disinterested in the region. They could view the lame duck period after a potential Trump election loss as an opportunity to change the status quo on a territorial claim—testing both the outgoing Trump administration and the incoming Biden administration. Chinese overreach would be most likely to take place around Taiwan, Japan, or the Philippines, with the potential to pull in the US military. China has been more likely to sabre rattle with these countries in the South and East China Seas because of its military and economic superiority. Of particular concern is an accidental or planned physical collision between Chinese and Taiwan military assets, which would raise concerns of a fourth Taiwan Strait crisis and could force both sides into a game of chicken, with the US's defense of Taiwan the key wildcard.

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