Butterfly Effect: Can Xi Avoid Trump’s Trap? - OZY | A Modern Media Company
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Does it help China to stay restrained when Trump provokes it? Its answer will shape the world.

Charu Sudan Kasturi

Charu Sudan Kasturi

OZY Senior Editor Charu Sudan Kasturi's column, "Butterfly Effect," connects the dots on seemingly unrelated global headlines, highlighting what could happen next and who is likely to be impacted.

By Charu Sudan Kasturi

It could be the final nail in the coffin for Huawei, the Chinese telecommunications giant. Last week, the Trump administration, which had already proscribed the use of Huawei in America’s planned 5G networks, banned the firm from using any chips that involve American technology. It’s no longer about keeping Huawei out of America — it’s about killing one of China’s tech titans.

Yet apart from propaganda-laced vitriol against the United States in its state media, China hasn’t meaningfully retaliated so far. It has similarly refrained from targeting American companies after President Donald Trump banned the use of popular social media app TikTok from mid-September unless it’s sold by then to a U.S. firm.

Usually, when countries turn the screws on rivals, it’s because they’re convinced the other side doesn’t have the wherewithal to seriously hit back. But this is 2020, and as with everything else, the game here is different: Trump wants China to strike back, and that’s a major part of the reason Beijing is trying to keep its cool. Yet a combination of the political mood in the U.S. and growing domestic pressure in China could nudge President Xi Jinping toward abandoning that restraint. And that would ultimately be bad for the U.S., China and the world — though Trump and Xi might gain from it temporarily.

If Xi concludes that it’s pointless to wait for America’s anti-China politics to ebb, the rationale to strike back grows.

Over the past few weeks, Trump has — apart from his moves against Huawei and TikTok — threatened to ban popular Chinese social messaging platform WeChat, imposed sanctions on Chinese officials, withdrawn the extradition law with Hong Kong and shut down the Chinese Consulate in Houston. Each of those decisions might individually have some merits. But taken together, their timing makes it crystal clear that anti-China rhetoric is going to be a central element of Trump’s reelection campaign, as he uses Beijing to deflect criticism of his own administration’s mismanagement of the pandemic that has claimed more than 176,000 American lives.

China knows that any escalation because of anti-U.S. actions on its part will only feed into Trump’s narrative and encourage him to launch further provocations. An escalatory spiral in tensions ahead of the November election could also make future relations with the U.S. harder even if Democratic nominee Joe Biden wins. That’s why it has been restrained so far, beyond notional sanctions against a handful of senators and the closure of the U.S. Consulate in Chengdu.

Beijing has other reasons that are holding it back. China could cripple the supply chains that many of America’s biggest companies such as Apple depend on, damaging them in a way not dissimilar to Trump’s targeted attack on Huawei. But unlike Trump, China is pitching itself as the global leader of free trade and wooing foreign investors. Using a hammer against American firms would damage that image.

China’s strategy isn’t without its own risks, though. As the political discourse in the U.S. keeps shifting against China, it will become harder even for a Biden administration to roll back some of the steps Trump has taken. Hours after Biden indicated earlier this month that he would end Trump’s tariffs on Chinese products, his campaign walked that statement back and said the former vice president would “reevaluate” tariffs against Beijing. And on Sunday, Trump claimed that if Biden wins, “China will own our country.” If Xi concludes that it’s pointless to wait for America’s anti-China politics to ebb, the rationale to strike back grows.

And while it’s common in the West to think of authoritarian regimes as unresponsive to public sentiment, the Chinese Communist Party knows it cannot appear weak in the face of Trump’s provocations. The country’s modern history has been shaped by a desire to reverse what in China is known as the “century of humiliation” — when the proud and previously powerful nation was subjugated by Western powers, Russia and Japan before the 1940s. Already, TikTok owner ByteDance has faced flak on Chinese social media and from commentators for agreeing to sell its U.S. operations in the face of Trump’s threats, with some netizens calling the firm a “traitor.” If Trump continues to push China’s buttons, expect similar pressure to be applied to Xi and his regime.

So what happens if Xi’s patience snaps? What if he decides to kill Apple’s supply chains and weaponize the more than $1.2 trillion China holds in U.S. Treasury bills by selling them off? The immediate nationalist sentiment such moves might evoke in both countries could boost Trump and Xi. But by doing so, Xi would be eliminating vital economic interdependencies that have kept warmongers on either side on a leash. And in the long run, the intensifying economic confrontation with the U.S. can only hurt both nations as well as the global economy.

That’s not good for a leader like Xi, keen to rule for life. The next few months will tell us if he can see that.

Charu Sudan Kasturi

Charu Sudan Kasturi

OZY Senior Editor Charu Sudan Kasturi's column, "Butterfly Effect," connects the dots on seemingly unrelated global headlines, highlighting what could happen next and who is likely to be impacted.

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