Trump's Shadow over US-China Economic Relations

Abstract

With US President Trump in office for half a year now, some people are still hoping that he will back away from his proclaimed protectionist policies. ­Given the current mood of populism in the United States, however, we cannot assume that Trump will yield to the pressure from domestic companies with a strong stake in China and return to some kind of "realpolitik." As a result, trade protectionism, investment barriers, and competition over global technological leadership will likely increase under the Trump administration, opening up new space for cooperation between the European Union and China. Populists in the United States are blaming globalisation for the loss of jobs and rising economic insecurity. They want to halt the shift of global economic power in favour of other countries. Trump is accusing China of profiting disproportionally from global free trade. China–US trade disputes within the World Trade Organization framework can be expected to intensify. Concurrently, bilateral trade agreements are preferred by the Trump administration, as it believes the United States can reap trade benefits more effectively this way. The United States will strengthen its request for better access to the Chinese market, while Chinese direct investment in the United States will come under more pressure. We can expect that China's acquisitions of US companies with sensitive technology will be further restricted. The US withdrawal from the Trans-Pacific Partnership (TPP) is expected to lead to a decrease in US economic influence in Asia. The Trump administration seems to prioritise the short-term satisfaction of its populist clientele over the long-term impact on US competitiveness in the Asia-Pacific region. Under the Trump administration, we can expect that tension in US–China economic relations will increase. While the United States will remain an important economic partner of the European Union, the latter should use the window of opportunity to strengthen its trade and investment relations with China. Concluding the EU–China Investment Agreement will be an important step in this direction. In the light of Trump's "America First" policy, the Chinese side might be more willing to enter into this agreement, which will protect investments and facilitate greater market access for European companies.