Trade War and Sanctions Hit China Where It Hurts

Mainstream media headlines claiming China wants Donald Trump to win re-election seem to ignore all the facts. During his first term as president, Donald Trump has all but cut off trade talks with China and sanctioned Chinese officials for human rights abuses against Muslims and for suppressing democracy in Hong Kong. Trump stated he will be terminating visas for Chinese students with ties to the People’s Liberation Army (PLA) or the Chinese Communist Party (CCP), he has terminated visas for many journalists from state-owned media, and has required the rest to register as foreign missions. Additionally, the president ordered the closure of the Chinese consulate in Houston and vowed to extract compensation from Beijing for the coronavirus.

Trump is the first US president to stand up to China, and the last thing the PRC wants is four more years of Trump. Making good on his campaign promises to be tough on China, Trump has stepped up the pressure over the past year. Trade tariffs have increased steadily, serving the dual purpose of decreasing US demand for Chinese products, while encouraging US and foreign manufacturers to leave China. The intent is to shift their manufacturing to the US or other US allies. He has also hit out at China with state visits and engagements with Taiwan. And now, the US Navy is taking an aggressive stance against China in the South China Sea.

Human rights legislation regarding Xinjiang and Hong Kong have already resulted in economic sanctions and seizure of Chinese assets. Chinese firms that refuse to meet US requirements of transparency and audit are being delisted from US exchanges, while others are being blacklisted for human rights abuses. Chinese 5G provider Huawei, as well as Chinese apps Ticktock and WeChat, are being banned on the grounds of a national security breach. Although mainstream media would have you believe that the US has alienated its former friends, the reality is that a US-lead, anti-China alliance is forming with US allies taking similar steps to block and contain the PRC.

In September, 2019, 15% tariffs on $112 billion in Chinese imports took effect. By July 2020, the US had put a total of $550 billion worth of tariffs on Chinese products. To reduce US dependence on Chinese manufacturing and to bring jobs back to the US, the “Buy American” program encourages the government to buy American-made pharmaceuticals and medical equipment. Consequently, a $354 million contract was awarded to a US pharmaceutical company from Virginia. Another step toward destroying China’s position as the world’s factory is the Economic Prosperity Network, which would include companies and civil society groups cooperating “…on everything from digital business, energy and infrastructure to research, trade, education and commerce.” What’s more, the US is working closely with allies Australia, India, Japan, New Zealand, South Korea and Vietnam to shift manufacturing away from China and to restart the global economy.

Taiwan, South China Sea, and Hong Kong

To Beijing’s chagrin, President Trump approved $180 million in arms sales to Taiwan. He also renewed a $500 million Taiwan military training program. Under Trump, the US Navy has increased its port-of-calls to the island. The US State Department has changed previous policies, now allowing Taiwan to purchase submarine technologies form the US. Furthermore, the Pentagon has confirmed that 21 uniformed military personnel are now stationed in Taiwan. From sending a congratulatory message to Taiwan President Tsai Ing-wen on her successful re-election to scheduling the highest level US-Taiwan diplomatic meeting since 1979, President Trump has sent a clear message to Beijing that they will not dictate US relations with other countries.

The South China Sea is another area where the US is standing up to China. Despite the name, the South China Sea is not owned by China, although China would like it to be. It is strategically and economically important, as a full one-fifth of global trade passes through the area. Several of the members of the Association of Southeast Asian Nations (ASEAN) have legal rights to the sea, while China has claimed and allegedly armed a chain of uninhabited islands running through the sea. China maintains that its warships can patrol the area 12 nautical miles from these islands. Since no international court recognizes China’s rights to the islands, the reality is that China is sending warships 1,000 miles from its closest, legal shore.

US Pacific Fleet commander Admiral John Aquilino publicly sent a message to China saying, “We are committed to a rules-based order in the South China Sea, and we will continue to champion freedom of the seas and the rule of law.” To this end, the US Navy has increased its freedom of navigation operations, patrols by US warships meant to ensure that Vietnam, Philippines, Malaysia, and other claimants have a fair right to use the sea without being bullied by the Chinese Navy. Now, even US aircraft carriers are on patrol in the area.

The US Hong Kong Democracy and Human Rights Act allows the Trump administration to place sanctions on people and entities responsible for the loss of freedoms in Hong Kong. Banks, including international banks operating out of Hong Kong, could be subjected to sanctions, as can executives of those banks. Parallel to this act was a decision taken by the president to end Hong Kong’s special status. This means that “Made in Hong Kong” products will now have to say “Made in China” and will be subject to the same tariffs as other Chinese products.

One of the first people to be sanctioned under the Hong Kong law was Chief Executive Carrie Lam. Ten other officials were also so sanctioned, allowing the US government to seize any assets they have in the US. Under the Uighur Human Rights Act, the U.S. Treasury Department blacklisted the Xinjiang Production and Construction Corps (XPCC), Sun Jinlong, former party secretary of XPCC, and Peng Jiarui, XPCC’s deputy party secretary and commander. Also sanctioned were Xinjiang’s Communist Party Secretary Chen Quanguo, as well as officials in the Xinjiang Public Security Bureau. They will have their US assets frozen and US companies can no longer do business with them. Moreover, Sun Jinlong, Peng Jiarui, and Chen Quanguo will be barred from ever entering the United States.

Blacklisting and Blocking Chinese Technology

The Trump administration is planning to crack down on US-listed Chinese firms. Moving forward, Chinese firms which do not comply with US transparency and accounting principals will be delisted from US exchanges. For years, the Chinese government has obtained funding for its objectives, including the PLA military, by listing its firms on the NYSE and NASDAQ. Chinese state-owned firms and state-controlled firms claim that it is illegal for them to allow third parties to audit their financial records. Other Chinese firms hide behind Chinese laws, forbidding US auditors from seeing the financial records held in China. Alternatively, Chinese firms register as Hong Kong firms or Cayman Island firms to circumvent US restrictions. This will soon be changing. This new rule could cost the CCP hundreds of billions in lost funding.

China’s National Security Law, National Intelligence Law, and Cybersecurity Law all require Chinese companies to aid the communist party in data gathering. Consequently, Secretary Pompeo has recommended banning not only Chinese 5G provider Huawei, but also Chinese apps WeChat and TikTok on the grounds of national security. By banning these Chinese firms, Sec. Pompeo wishes to ensure that “’untrusted People’s Republic of China (PRC) carriers’ are not connected with the US telecommunications networks.” TikTok owner, ByteDance, claims the data of US users is stored outside of China. This point is moot, however, because in accordance with the Chinese laws mentioned above, they are extraterritorial in nature, applying to all Chinese firms and Chinese citizens anywhere in the world.

The US has asked members of the Five Eyes intelligence alliance- Australia, Canada, New Zealand and the UK to ban Huawei. To date, the UK, the Czech Republic, Denmark, Estonia, Latvia, Poland, Romania, and Sweden have done so. Australia’s Huawei ban was challenged by China. Italy has excluded Huawei from a bid for its 5G network. US security advisers have warned Canada against using Huawei, due to the security threat this would pose the US. So far, Canada has not made a final decision, but it appears that most of the population is in favor of taking a harsher stance against China and of banning Huawei. India is expected to ban Huawei, while it has already banned at least 48 Chinese apps, including Tiktok. Recent border incursions and military clashes with China have caused most of the Indian population to support a complete boycott of all Chinese products.

The president also blocked certain semiconductor sales to Chinese firms. US firms were already banned from selling to Huawei but now, even Taiwanese firms cannot sell semiconductors to the Chinese. One way CCP China has thwarted US restrictions was to partner with US companies who value profit over national security. Attorney General William Barr criticized American tech firms like Google, Microsoft, Yahoo and Apple for their support of and compliance with China. Steps are being taken to prevent these partnerships from taking place. US companies are now barred from doing business with blacklisted companies. In October of 2019, the US blacklisted 28 Chinese firms connected with human rights abuses in Xinjiang. In July 2020, eleven more firms were added to the blacklist.

A second term for President Trump can only mean more pain and isolation for China. He has hinted that he may prohibit visas to all members of the Chinese Communist Party, which accounts for roughly 10% of the Chinese population. More sanctions are also expected. In his Independence Day speech, President Trump vowed, regarding the coronavirus, “’China’s secrecy, deceptions and cover-up allowed it to spread all over the world … and China must be held fully accountable.’” If Trump were to move forward with extracting coronavirus compensation from China, the bill could be in the trillions of dollars.