When Donald Trump’s offensive against China first began with tariffs on steel and aluminum exports, hardly anyone could imagine the present scenario. Things have gone so far in 2020 that now the US President is blaming a global pandemic on China and trying to force the country to sell some of its most successful companies to American buyers. What happened and, more importantly, where do we go from here?
If you rewind back to Trump’s election campaign of 2015-2016, you will see that China has always been an object of fascination (some might say obsession) for him. Trump’s campaign and presidency were built around two main topics - the infamous wall on the border with Mexico, and China.
Trump’s wall plan crashed and burned, leading nowhere. Thus, his attention turned to China, where he perceived the US had a problem: importing too much from and exporting too little to China. He tried to fix that with tariff upon tariff, which met with little success. Eventually, Trump scaled back on his aggressive rhetoric and tried to reconcile with China through the phase-1 trade agreement signed in January this year.
But while many expected the agreement to lay the groundwork for a more comprehensive trade pact in the future, things have gone downhill since then. Trump has blamed China for not containing the coronavirus properly and has even blamed the World Health Organization for supposedly taking China’s side on the issue (which motivated his decision to pull the US out of the WHO).
Just a few weeks ago, the President ordered a Chinese consulate in the US to close down, and China did the same in return.
The latest point of pressure Trump is trying to exercise relates to tech and social media, as the President has taken aim at two of China’s most successful apps - TikTok and WeChat.
Trump announced that as of September 15, both apps will be banned in the United States. However, he added an important caveat - they can continue operating in the country if their Chinese parent companies sold them to US buyers.
The official grounds for Trump’s decision are possible security risks. Even US companies like Facebook and Twitter have come under scrutiny in the past over the ways they handle user data. With Chinese-owned apps, the government is twice as suspicious about the treatment of sensitive information that these apps may be gathering.
The consequences of Trump’s latest move vary in significance. First of all, they have implications for the stock value of the apps involved - shares are expected to plummet. Secondly, investors are worried that other successful Chinese apps (e.g. mobile game PUBG) could be next. Also, Google and Apple were ordered to take down the apps from their respective stores, which can hurt consumer demand in China.
The biggest concern on anyone’s mind, however, is if this latest escalation would bring about another cycle of the trade war between the United States and China. Despite their recent disagreements, the two countries have not directly attacked each other on a trade basis since the phase-1 agreement was signed.
The two countries decided to hold a video conference on August 15 to discuss the agreement. It will be six months since its February implementation, but both sides will be coming into the meeting in a negative mood. China is dissatisfied with the United States putting the blame for the coronavirus on its shoulders and for banning two of its most successful apps. The US, on the other hand, is unhappy that China has failed to meet the conditions set out in the agreement, though the pact was signed before the coronavirus pandemic and the ensuing recession.
Thus, all eyes will be on the August 15 meeting. It offers a possibility for a reconciliation, but more than that, it gives Trump’s administration a chance to dissolve the pact and reinstate the trade war and further complicate the situation on the global markets.
