The decline continues

Two months into the second term of Donald Trump he continues to grab the daily headlines.  Like some daily soap opera each day provides new drama and outrage.  The “flood the zone” strategy by the team behind the president isn’t some accident but is the plan to disorientate and overwhelm those who would push back against what is in many cases illegal actions and presidential overreach.  Whether it be changes and closures of aid programs, of bio-medical research or of whole government departments, or the illegal firing of thousands of federal employees the sheer scale of what is being done has meant that opposition politicians, the traditional media outlets and the courts have been unable to respond fast enough to put a brake on much of what has happened.  As the courts, the third equal branch of the US government system have only recently started to push back on the executive branch’s power grab a growing number of both media commentators and even appointment cabinet officials have called for court rulings to be ignored and Trump himself called for a judge to be impeached because he didn’t like the judge’s ruling.  This is a fundamental breakdown of the rule of law in the US and moves the country from a democracy to an authoritarian state where laws are obeyed only if they suit the President’s wishes.  For those countries who had allied themselves with the US this is a hugely problematic development and is making the US a highly untrustworthy partner.

For all his big talk Trump has failed to stop the Ukraine war and even the ceasefire in Gaza which he claimed as his own when he entered office has now stalled with Israel again bombing Gaza and sending troops into the territory.  What he has been able to do, and do very effectively is threaten and bully his neighbours and allies.  Tariffs are now in place on Canada and Mexico, of course on China, on steel and aluminum and come April 2 Trump plans to announce his reciprocal tariffs which will look to target almost all his trading partners, especially the European Union.

He was indeed correct when he joked that the public berating of President Zelenskii by himself and Vice-President Vance would make great TV but this betrayal of Ukraine has failed to produce meaningful results.  The Ukrainian president was likely not properly prepared for his meeting but his eventually willingness to agree a ceasefire really did mean that it was for Russia to step up and stop the firing.  For anyone who understood Russia and Putin it was clear they would not play along with Trump and indeed that proved to be the case.  Instead all he achieved was to show his (former) allies in Europe that the US under Trump was wholly untrustworthy and provide further evidence that Europe must start to prepare for a post-NATO security order where the US cannot be relied upon.

With Trump’s gutting of the domestic government and his torching of international alliances and friendships why then should China be discomforted?  Isnt’ the collapse of the US led world order what China wants?

China’s European War

It can be tempting to think that every time Trump tears up a treaty or withdraws from some global that the natural winner is China.  Certainly, there is no benefit accruing to the US from withdrawal from the WHO or the Paris Climate accord and a lazy interpretation would be that China can step in to fill the void.  In some cases that might be true, but it also assumes that China is ready and capable to take a global leadership role.  So much of China and Russia’s global vision has not been about what they offer the world but a rejection of what America was offering.

When Russia invaded Ukraine the response of China was going to be crucial to Russia’s ability to prosecute the war.  Perhaps Putin did give Xi Jinping a heads up about his special military operation, but he, like, Putin, assumed that it would all be over in a matter of days or weeks.  Three years later China remains onside with Russia having increased its trade markedly with Russia and being a key provider of non-lethal technology and materials and the primary buyer of Russian hydrocarbons.  China hallowed principles of non-interference in other countries affairs has conveniently been forgotten about when it came to Ukrainian sovereignty.

In Putin’s world view Ukraine wasn’t a proper country, it was some sort of puppet regime which was supported by the US as a way to weaken Russia.  So, Russia while nominally fighting Ukrainian nationals was really in a war with the US.  That distorted logic provided a narrative which allowed first Iran to actively supply Russian with drone technology and then have North Korea providing soldiers to help the Russian war effort.  That distorted world order could allow the CRINK countries (China, Russian, Iran & North Korea) to justify their actions not as supporting an unprovoked attack on Ukraine but as a indirect way of attacking the United States.  A direct attack would be total madness but by tying the US down in Ukraine that would distract America from other areas of the globe.  But that entire calculus has been shattered by Trump.  As Trump has effectively switched sides when it comes to Russia and Ukraine, and the EU and other European countries are slowly coming to terms that they must take the primary role in supporting Ukraine in war and peace then the Ukraine war is not (and never was) a proxy war against America.  It is attack on a European country, i.e. Ukraine, with European countries as the primary backers of Ukraine.  That leaves China is a highly unfavourable position with the Europeans nations as it tries to charm them into closer cooperation as a counterweight to America First trade policies yet at the same time underwrites and materially supports an attack on a European ally.

China no doubt saw itself perfectly poised to provide the trusted trade partner to Europe, a stable and reliable trade partner to work with Europe on the green energy transition.  Part of that narrative might still work with some groups but even before Trump the EU was at last waking up to the very uneven and unequal trading relationships between China and Europe.

By turning his back on Ukraine Trump has also forced other nations to think more seriously about their own defence and in all likelihood look to establish new alliances and partnerships to help them cope with the China threat.  South Korea and Japan are the obvious examples in Asia.  While both home to American troops and both historically firm US allies they too must be worried by the direction America is taking and the real risks of depending on America for your security.

And let it not be forgotten that while America is torching its alliances and commitments in Europe it is in part doing this so it can focus its attention on China.  What that means is anyone’s guess at this stage.  Trump’s team have been remarkably quiet on China and while there have been some tariffs there is nothing substantive which resembles a China policy.  Trump has talked about a Xi visit to America, details of course completely lacking, and he talks about doing a deal with China but so far his deals have generally come up short.  Wars haven’t stopped, peace hasn’t been achieved, and economic gains are non-existent.

China’s global companies, or not

An early target of Trump’s wrath was over control of the Panama Canal.  Trump wrongly stated that the canal was controlled by China and that American ships were charged a premium to use it.  The second part was certainly wrong but the first had some limited justification.  Hong Kong based Hutchison International controlled two ports along the canal and although Hutchison is owned by Hong Kong’s most famous businessman, Li Ka Shing, Trump drew a direct connection to control by the Chinese state.  Li Ka Shing is one of the world’s savviest businessmen.  Although Li, like many of his HK tycoons peers, have made his early fortune from Hong Kong property and was close to former Chinese president Jiang Zemin but once Jiang had stepped down and tensions grew in Hong Kong Li started to divest of Hong Kong and China related assets and move into overseas infrastructure and telecommunications.  No doubt realizing the immediate global tensions and potential damage to global trade Li’s response to Trump’s threats about the canal was to agree a deal to sell 43 ports across 23 countries to a consortium led by Blackrock, the US asset management company.  The Chinese government was furious.  A commentary in a local pro-Beijing newspaper slammed the deal and was reposted by China’s government offices in Hong Kong, this was clearly an official endorsement of the commentary.

Hong Kong’s government also came out warning that the deal would need to abide by all laws but there was no indication at all that any laws were being broken in what was on paper at least a straightforward corporate deal regarding international assets.

No doubt Beijing was furious that a Chinese company had been “forced” by Trump to sell the ports, but this would indicate that the Chinese state considered Hutchison effectively an extension of the Chinese state.  Hutchison is certainly not a state-owned enterprise, it is a private company majority owned by Li Ka Shing who has a wide range of international assets.  Is the Chinese state trying to say that it isn’t a private company?  Or is it a private company but will act on the wishes of the CCP when needed?  Should other countries now treat investment by Li Ka Shing as effectively a front for the communist party?  Does this now apply to all Hong Kong companies, or indeed by any company founded by a Chinese national?

Perhaps China is only mimicking the US when it rails against regulations and oversight of its companies.  Just a few weeks ago Vice-President Vance railed against European regulators about fines and regulation regarding the actions of US tech companies in Europe even though those US companies are not state owned.  Isn’t this just China doing the same?

Did the Chinese state really have control over the canal, or indeed other ports, just because Hutchison owned them?  Based on public information it just isn’t clear but Chinese reaction has certainly put Hong Kong companies in a difficult position and further confused the distinction between state and private ownership just at a time that China wants to try and step into the gaps which have been created by Trump’s retreat from the world.

America’s loss need not be China’s gain

Day by day Trump and his team set about dismantling both domestic and international frameworks and institutions which have largely kept the peace, and certainly limited territorial wars for the past 80 years.  The end of the cold war and the rise of China over the past 30 years or so have certainly shown real weaknesses within that order but destroying the old without thinking about the new is foolish in the extreme.

China has often railed against that American led order and has demanded something different even if it has failed to clearly states what it wants and what role it will play in that new order.  But as Trump withdraws from the world that doesn’t mean there is an easy space for China to step to.  Trump’s administration is still putting tariffs on Chinese goods, he is still bringing in new sanctions on Chinese companies and many in his administration are confirmed China “hawks”.  China is not getting a free ride from America but Trump’s actions have resulted in many other countries taking more control of their own affairs and they too are concerned about China’s growing clout in the world.  As security concerns multiple and the Chinese state continues to blur lines between state and private businesses then China may find the collapse of the old order isn’t as accommodating to it as it hoped for.