US-Asia Relations in the Age of Trump

Not since Harry Truman registered a surprise, come-from-behind victory over his Republican challenger, Thomas Dewey in 1948, has an American presidential election delivered such a stunning upset. On November 8, 2016, Donald Trump defeated his Democratic Party challenger, Hillary Clinton, in a bruising race, despite having trailed in every authoritative pre-poll survey in the months leading into the election. When the votes are officially tallied, Trump may coincidentally end up with an almost-identical electoral college total as Truman (306 for Truman’s 303).

At many levels, the President-elect Trump represents a remarkable break from his recent predecessors. On one count though, he presents a slight continuity that spans three presidencies over the past quarter century: a pattern of diminishing tenure in elected office prior to ascending the presidency. Bill Clinton served barely a decade in elected office before entering the Oval Office; George W. Bush barely a half-decade; Barack Obama even less. Having held no elected office and with no experience in public service, Trump represents the nadir of this unfortunate trend.

President-elect Trump’s victory can be ascribed to the hollowing-out of basic manufacturing in the American heartland. This has stirred deep resentment among predominantly white men and women (more white women voted for Trump than Clinton) in affected communities. A vote for Trump was a vote against mainstream politicians and their elitist backers as well as foreign interests – manifested in hardline view against international trade and immigration. This ‘whitelash’ has bubbled to the surface against the larger backdrop of stagnant incomes and rampant inequality. Real median household incomes in 2016 remains below 2000 levels. Even in the 95th percentile of the wage ladder, incomes have registered a modest 45 percent rise over the past four decades. Wages of the top 1 percent, meantime, rose 180 percent over the same period. Just as important, the U.S. has suffered the second-largest increase in male non-participation in the labor force since 1990 among OECD countries and economists foresee the size of this cohort rising to a quarter of all working age men by mid-century.

Donald Trump’s unabashed pandering to this aggrieved voter base as well as the long-standing consistency of his (much less-noticed) anti-trade convictions bear implications for Washington’s China policy. First and foremost, America is turning inwards. Weighed down by its socio-economic problems, the U.S. will lack the will and increasingly the capability to lead the international order. This inward turn will be felt most acutely, and impact negatively, the rules-based international economic order where the Trans-Pacific Partnership (TPP) Agreement has already become its earliest and highest profile victim. TPP in its current form will not be resurrected under a Trump or successor administration.

The next most important implication is America’s turn towards protectionism. To restore employment in American manufacturing, Trump has promised to raise tariffs on Chinese exports to levels well above the U.S.’ World Trade Organization (WTO) treaty bindings as well as leverage the full force of American trade remedies measures – and even perhaps emergency economic powers – against Chinese trade flows. The anticipated economic and legal retaliation will not stymie his inclination, though could moderate it. Ever since his 1980s days as a young real estate developer in Manhattan, it has been an article of faith that Asians (Japanese, at the time) are instinctively mercantilist and deceitful in their international trade practices. The imposition of steep tariffs on Japanese motorcycles (45%) and semiconductor products (100%) by Ronald Reagan in the pre-WTO era remains his go-to playbook. The deep U.S.-China trade frictions that will arise are likely to rub-off on the bilateral investment side too where the American case for restraints on Chinese state-linked companies’ U.S. acquisitions as well as more reciprocal access to China’s inward direct investment market stand on much firmer ground.

Third, trade policy aside, the rest of Trump’s economic philosophy, much of which is standard Republican/Reaganomics fare (genuflect to deregulated private markets and the ‘1%’), will roil currency markets. In the short-term, loose fiscal policy and tighter monetary policy at a time of depressed aggregate global demand will suck capital flows into the U.S. For the longer term, federal government debt sustainability concerns balanced against dollar-as-safe-haven considerations will exert downward pressure on the dollar. Imposing illegal countervailing duties after designating China to be a ‘currency manipulator’ will conjoin, and compound, the trade and currency crises and could lead to bouts of extreme volatility in forex markets.

Fourth, the foreign and national security policies of Trump’s America will assume a more isolationist cast as well as a willingness to devolve greater responsibility to other major powers and partners to manage global and regional challenges. While defense preparedness will not be sacrificed, grand canvas strategic deterrence calculations in Europe and Asia will take a backseat to the application of force to eliminate more immediate (or self-elevated) existential threats. Radical Islamist extremism stands at the head of this existential queue.

In the Asia-Pacific, the presumed strategic freeriding by allies and partners – the essential enabler of their trade policy deceit in Trump’s long-held worldview – will manifest in harsher demands for financial and military burden-sharing. While legal defense obligations to allies will be honored in full, the more hands-off policy towards Asia’s foreign relations will diminish confidence in American resolve among its non-allied regional partners, particularly in Southeast Asia. Over time, this irresolution and inattention will call into question America’s long-term staying power in a leadership or co-leadership role in Asia – in turn, opening the door to less adventurous and more constructive approaches on the part of the ASEAN countries in their diplomatic ties with China. What remains of an-already unremarkable ‘pivot to Asia’ will become even more unremarkable.

Fifth, the hard-fought recent gains in U.S-China and multilateral environment cooperation faces a moment of peril. Climate denialism and regulatory abhorrence forms a rare point of concurrence that unites Trump’s nativist, blue-collar base with his elitist 1% backers within the Republican Party. As he fails to deliver on his quixotic jobs re-shoring and immigration-related promises (building a “tall, powerful, beautiful, southern border wall”) to his nativist base, unravelling the delicate thread that ties America’s peer-based and non-enforceable, action-for-action Paris Climate Change Agreement commitments offers a low-cost sacrificial path instead. Voiding Paris will further erode the U.S. ‘soft power’ standing, which has already taken a beating during the sordid election campaign.

A final implication of Trump’s victory is that management of U.S.-China relations will become unsettled in the short and medium-term. For the most part of four decades, U.S.-China relations has remained on a stable and predictable track – regardless of the hawkishness or dovishness of the incumbent president. Trump however is a political novice and is in part surrounded by a set of core political advisors with little executive branch-legislative branch relationship management experience and even lesser experience in U.S.-China relations. The likelihood therefore is of an error-strewn early presidency that will encounter a steep on-the-job learning curve in both domestic policy and foreign affairs.

Donald Trump’s victory represents a last hurrah for the coalition that Ronald Reagan cobbled together to achieve his famous victories. As the disillusioned, blue-collar nativist element within slowly defects from a party that remains bound and determined to cater to the interests of its 1% backers, including under the incoming Trump Administration, U.S. politics will enter a period of flux. This will have knock-on effects on its overseas engagements too for years to come.