By Clay Chandler
January 20, 2018

In the first year of his presidency Donald Trump took a soft line on China, belying his strident “China, China, China” rhetoric on the campaign trail. But a flurry of recent reports suggest that in 2018 Trump’s bromance with Chinese leader Xi Jinping is headed for a breakup.

At long last, we’re told, Trump has had enough. He’s ready to seize the Chinese dragon by its whiskers on a host of issues ranging from North Korea and the South China Sea, to intellectual property rights and immigration. There are signs of a fundamental policy shift.

On Friday, the U.S. Defense Department released an 11 page summary of its 2018 National Defense Strategy identifying competition with China and Russia as “principal priorities” for the US military. The report, distilled from a more detailed classified document submitted to Congress last year, warns that America’s two authoritarian rivals are actively seeking to “co-opt or replace the free and open order that has enabled global security and prosperity in since World War II.” Henceforth, “great-power competition,” not terrorism, must be the primary focus of U.S. national security, the report declares: “The central challenge to U.S. prosperity and security is the reemergence of long-term strategic competition,” primarily from China and Russia.

That same day my old Wall Street Journal colleague Jake Schlesinger reported that the Trump administration intends to be “more focused in the coming year on countering China”—unlike last year, when it sparred with a broad range of allies in North America, Europe and Asia. From here on, Jake reported, quoting unnamed officials “designated by the White House to speak about coming trade enforcement decisions and negotiations,” the Trump administration will emphasize “enforcement over negotiations” when dealing with China, and give up on trying to resolve disputes through the World Trade Organization.

Journal columnist Andrew Browne, similarly, says the White House is readying “a mix of tariffs and quotas” to deter Chinese imports of “everything from steel to solar panels and washing machines.” Last year’s record Chinese trade surplus with the US, Browne notes, is a “potential catalyst for hostilities after a year of bluster.”

Rhodium Group founding partner Daniel Rosen, a veteran China expert, argues in an essay this week that the US-China relationship has entered a “post-engagement” phase. After a year of empty fulmination, Rosen writes, Trump’s China threats have grown “real teeth…Many in China think this is a rough patch and will blow over. It won’t.”

And there are plenty of other ominous portents. On Monday, the FBI arrested Jerry Chun Shing Lee, a prime suspect in a high stakes espionage battle with China, as he stepped off a Cathay Pacific flight at Kennedy International Airport. US official allege Lee, a former CIA agent employed by Christie’s in Hong Kong, was double agent who ratted out U.S. intelligence operatives in China, many of whom were imprisoned or executed.

Also this week, the Wall Street Journal reported that U.S. counterintelligence officials in early 2017 warned Trump son-in-law and senior adviser Jared Kushner that Wendi Deng Murdoch, the ex-wife of Journal owner Rupert Murdoch, might be using her friendship with Kushner and his wife, Ivanka Trump, to “further the interests of the Chinese government.” In the New Yorker, Adam Entous and Evan Osnos suggest Jared and Ivanka naively allowed themselves to be manipulated by China’s ambassador the US, Cui Tiankai.

All that intrigue swirls in the wake of U.S. congressional moves against attempted U.S. investments by two high-profile Chinese companies. In early January, Ant Financial, the electronics payment affiliate of China’s Alibaba Group, and MoneyGram, a Texas-based money transfer company, announced that it had been forced to abandon a proposed deal after failing to win approval from the Committee on Foreign Investment in the United States (CFIUS), a congressional panel that reviews foreign purchases of American companies. Last week, a proposed alliance between China telecom manufacturer Huawei Technologies and U.S. carrier AT&T collapsed after members of the U.S. Senate and House intelligence committees dispatched a letter to the Federal Communications Commission citing concerns about “Chinese espionage in general, and Huawei’s role in that espionage in particular.”

Are the world’s two largest economies finally headed for a showdown? It certainly looks that way. But it’s impossible to be sure. As always, the wild card in the Age of Trump is Trump himself, who remains as inconsistent, contradictory and unpredictable as ever.

More China news below.

Clay Chandler
@claychandler
clay.chandler@timeinc.com

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