The Fiction of Western Unity on China De-Risking
U.S. allies must prepare for an administration that views almost any tie to China as a source of vulnerability.
The Biden administration’s approach to selectively cut economic ties to China masks a division within the West that Trump’s election victory will surely deepen. Over recent years, Washington’s closest geopolitical partners were able to labor under a happy delusion regarding their relations with China. Full economic and technological decoupling between China and the West was deemed impossible and even undesirable. Much of the policy focus was on reducing specific, narrow risks of dependency on and coercion by Beijing. To signal consensus and paper over their differences over the extent of separation, Western diplomats, including those in the United States, duly began talking about de-risking rather than decoupling.
Trump’s return to the White House makes it clear that this unity was a mirage. The United States is now promising a much more profound separation from China—potentially even decoupling in full.
This presents significant dilemmas for Washington’s partners. Trump will pressure them to follow his decoupling lead when few have an interest in doing so. So far, most European nations have failed to take more than a few small steps to de-risk from China. Some, such as Britain and Germany, have even begun a process of “re-risking” by looking to deepen diplomatic and economic ties with Beijing. East Asian allies like Japan and South Korea take de-risking more seriously. But even here, the realities of trade and geography make a more dramatic form of separation highly problematic.
In Trump’s mind, the most obvious route to full decoupling remains trade policy. Recent appointments clearly show the direction he plans to take. Trade attorney Jamieson Greer, Trump’s announced pick to be the next U.S. trade representative, specifically called for an intensified process of “strategic decoupling” earlier this year. A protégé of Robert Lighthizer, who was trade representative during Trump’s first term, Greer will now push forward with an array of tough new tariffs and export controls. In this sense, the second Trump administration will be quite different from the first, which focused much more narrowly—and ultimately unsuccessfully—on using tariffs to reduce the United States’ bilateral trade deficit with China.
That said, tariffs will once again be Trump’s favored tool. During the election campaign, he threatened Chinese products with levies as high as 60 percent. In November, he pledged an additional 10 percent to punish Beijing for failing to stop its fentanyl exports. Some of these threats might turn out to be negotiating ploys. But it seems clear that Trump’s team is planning substantial new trade measures. If we take him at his word, a 60 percent tariff on U.S. imports of Chinese products would be enough to drive U.S.-China trade close to zero, according to calculations by Tom Orlik, chief economist at Bloomberg.
New measures pushing separation are likely as soon as Trump takes office. One will be the announcement of a state of economic emergency, a legal ploy allowing the administration to unilaterally change tariffs. Further measures are sure to follow under Section 301 of the 1974 Trade Act, which grants the U.S. trade representative broad powers to respond to alleged unfair trade practices. Trump favored this tariff tool during his original trade war with China, which took place from 2018 to 2020, and is sure to use it again, said Hinrich Foundation trade expert Deborah Elms.
Even tariffs set below 60 percent would have a substantial decoupling effect. The barriers put up during Trump’s first term sharply reduced Chinese exports. Biden’s tenure then saw U.S. dependence on Chinese manufactured goods fall further. This year, Mexico overtook China to become the United States’ leading provider of imported goods for the first time in decades.
There are, of course, good reasons to doubt the wisdom of this approach. High tariffs will damage the U.S. economy by stoking inflation. They will cause international contagion, too, as other nations respond with tariffs of their own. There will be substantial second-order effects, for instance, as China redirects its vast export overcapacity to economies in Europe, the global south, and elsewhere, or craftily shifts production to third countries to avoid U.S. tariffs. Some nations are already moving to avoid U.S. criticism that they act as bases for Chinese firms to dodge U.S. tariffs, as Malaysia did this week.
Trump’s team seems happy to take these risks, however, viewing them as a price worth paying to reshore and rebuild U.S, manufacturing capabilities and reduce dependency on China. “In some cases, the effort to pursue strategic decoupling from China will cause short-term pain,” Greer said at a U.S. congressional hearing in May. “The cost of doing nothing or underestimating the threat posed by China is far greater.”
These economic measures will be supported with enthusiasm by Trump’s new national security team, which is readying new measures that target China’s burgeoning technology sector. The recent restrictions on semiconductor exports will likely be followed by others targeting areas like biotechnology and quantum computing once Trump takes office. The intention to decouple in as many strategically significant technologies as possible is clear enough. “Washington should, in fact, seek to decouple its economy from China’s,” Robert O’Brien, Trump’s former national security advisor wrote in June.
All of this creates major problems for U.S. partners abroad. Almost all would prefer a world of modest de-risking from China, not radical decoupling. Many hope that Trump’s tariff threats will turn out to be mostly bluster or that global supply chains will prove too integrated and important to be fully unwound. Overall, global manufacturing, trade, and financial networks remain in reasonably robust health, with recent research conducted by New York University’s Stern School of Business showing few signs of a collapse in economic interconnections at the global level.
Yet this high-level picture hides important details, specifically the differing directions being taken by Washington on the one hand and its geopolitical partners on the other. Over the last five years, the United States has sharply reduced its dependence on imports of Chinese manufactured goods, for instance. Across the European Union that reliance has increased, however, according to research from the Peterson Institute for International Economics. In Asia, for all its talk of de-risking, China remains Japan’s largest trading partner by far.
To make matters worse, many U.S. allies have tried to improve ties with China over the last two years. Britain, for example, is rekindling a program of visits and diplomatic exchanges. Berlin lobbied hard to stop European-wide tariffs on Chinese electric vehicles this year as German automakers doubled down on their investments in China. Tokyo resumed a strategic dialogue with Beijing earlier this year. South Korea joined Japan in a resumed trilateral summit with China in May.
All this leaves Washington’s partners grappling with a complex diplomatic challenge. The polite fiction that the West is united in supporting selective de-risking is no longer viable. Nations in Europe and Asia now must come to terms with an administration in Washington that views almost any tie to China as a source of vulnerability. These divisions are only likely to grow as Trump’s team moves forward with its decoupling plans.
It also leaves an invidious choice. Either the United States’ allies and friends push back against Washington’s embrace of decoupling, at the cost of angering Trump and his team, or they can go along with some or all of them, imperiling whatever tentative steps they have taken to stabilize their relations with Beijing. In Southeast Asia, it is common to hear plaintive national leaders complain that they don’t want to choose between the world’s two superpowers. Yet as Trump’s team looks to force such a choice, the United States’ closest partners elsewhere around the world are soon likely to face even greater pressure to pick a side—or face the consequences.
This post is part of FP’s ongoing coverage of the Trump transition. Follow along here.
James Crabtree is a columnist at Foreign Policy, a former executive director of the International Institute for Strategic Studies-Asia, and the author of The Billionaire Raj: A Journey Through India’s New Gilded Age. X: @jamescrabtree