Trump: an opportunity for China?

From Beijing’s perspective, electing the ‘deal maker’ was preferable to continuing a Democratic policy that made American technological leadership the guarantee of the defence of democracy and human rights. By seeking first and foremost to attract investment to the United States, Trump remains ambivalent about decoupling the Chinese economy.

Admittedly, the America First Investment Policy of 21 February tightens restrictions on access to American innovation in critical technologies (AI, supercomputers, etc.) and personal data. Foreign investors will now even have to choose between the American and Chinese markets: restrictions on access to the American market ‘will be relaxed in proportion to their verifiable distance and independence’ from the risks of technological acquisition by China or other adversaries.

However, despite the anti-Chinese stance of Secretary of State Marco Rubio, National Security Advisor Mike Waltz and Trade Advisor Peter Navarro, Trump still talks about Chinese investment creating American jobs, particularly in green technologies, while neglecting climate change and failing to make catching up with Chinese technological leadership in this sector a priority for American industry. In exchange, China would have to guarantee greater openness of its market to American investors – as provided for in the 2020 Phase One bilateral agreement – and address the issue of overcapacity, which is exacerbated by sluggish Chinese demand.

Such an agreement would be detrimental to Europeans, whose 2020 investment agreement with China is blocked by reciprocal sanctions. Trump is already limiting the ability of Chinese products to circumvent tariffs by closing the back door to the US market with massive tariffs on imports from Mexico and Canada. Rather than tackling the causes of Chinese overcapacity, he will be content, as in 2020, to obtain guarantees on the redirection of cheap Chinese exports to other markets, primarily the European market.

At the same time as the European Commission is preparing a firm response to Trump’s tariff offensive, European policy towards China needs to be adjusted. It has announced that it will actively use trade defence instruments (safeguard clauses, anti-dumping and anti-subsidy measures) against increased pressure from Chinese imports. It is also proposing a major change in doctrine with its Clean Industry Pact, which is open to Chinese investment on condition that it promotes local employment and is accompanied by technology transfers. Financial support for green industry would also be accompanied by a European preference for public procurement. However, negotiations are still needed to maintain the openness of the single market in exchange for greater openness of the Chinese market to European investors, and not just American investors, given that the aim now is not only to access Chinese consumers but also Chinese innovation capacity.

While Trump’s contradictory announcements and tariff postponements are currently prompting foreign investors to adopt a wait-and-see approach, Europeans must actively anticipate this scenario of a Sino-American agreement.