TSG IntelBrief: Rising Tensions Between China and the U.S.
June 28, 2017

Rising Tensions Between China and the U.S.

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Bottom Line Up Front:

• On June 27, the U.S. State Department listed China as among the worst countries for human trafficking, in part as leverage with North Korea.

• The U.S. will likely announce tariffs on imported steel, a serious point of contention with China.

• From the South China Sea to North Korea, the U.S. and China are running out of time to address points of building tension.

• As U.S. leadership in global affairs decreases, China will more frequently use diplomatic and soft power to build coalitions that don’t include Washington.

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There was little optimism after the April 2017 meeting between U.S. President Trump and Chinese President Xi Jinping that views of ‘personal friendship’ would supersede long-running geopolitical and economic contentions between Washington and Beijing. From concerns over China’s actions and intentions in the South China Sea and expanded littoral waters, to frustrations over North Korea, the initial – brief – optimism has been replaced by a series of statements, tweets, and policies that highlight the frictions between the two countries. Some of the increased frustration in Washington is over China’s perceived unwillingness to pressure North Korea to adhere to international treaties and obligations. The administration had hoped for a quick win in a decades-long struggle; when that didn’t materialize, the U.S. turned quickly from statements of friendship with Beijing to tweets highlighting frustration and blame.

On June 27, U.S. Secretary of State Tillerson made a relatively rare high-profile public statement with the release of the State Department’s yearly report on human trafficking. China was placed in the worst tier of violators, which includes Iran and North Korea, among others. While such a designation – only the second time the U.S. has listed China in the bottom tier in 12 years – in theory can lead to sanctions, the listing was meant to serve as public pressure to get China to act more decisively against North Korea. China does have leverage with North Korea, though likely not as much as Washington assumes. The administration has decided that high-pressure diplomacy is the best tact, with the risk and reward of such a pivot uncertain, but significant either way. For its part, China denounced the latest trafficking listing, saying that “no country has the right to speak irresponsibly on China’s domestic affairs.”

The world’s two largest economies are now maneuvering in a very different fashion, with the U.S. moving away from multilateral large-scale coalitions on issues like trade and climate change. The transactional approach of the Trump administration, viewing international affairs through the lens of domestic politics, all but ensures that the Chinese are being handled in line with Trump’s rhetoric during his presidential campaign. This comes as a time when the E.U. and others are looking for multilateral cooperation of global issues, even as the U.S. is pulling inward.

In the coming weeks, the U.S. Commerce Department is likely to announce new tariffs on imported steel, something Beijing will oppose far more than being listed as a human trafficking violator. A tariff war between the largest economies would have significant consequences on both countries, as well as the interconnected global economy still recovering from the 2008-2009 financial collapse. Traditional heavy industries such as steel and coal, while crucial, make up a shrinking part of the massive U.S. economy. The administration’s focus on these is consistent with its view of the U.S. through a historical lens, rather than thinking of future possibilities, and will ensure increased conflict with China.

It is unclear if the new approach of diplomatic and, likely economic, pressure will extend to the South China Sea, a serious source of concern and tension between China and its neighbors, including Japan and the Philippines. The U.S. has periodically conducted freedom of navigation operations by naval ships near several artificial-or-enhanced-islands claimed by China as a sign that the crucial sea lanes will remain open to all. China objects very strongly to these, and if Washington’s new approach towards China includes more of these operations –along with military flights – tensions will surely escalate.

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