Why Clinton’s China Policy Puts More at Risk than Trump’s

Why Clinton’s China Policy Puts More at Risk than Trump’s

The two confirmed presidential candidates we’ll have by the end of this week have little in common, except they’re both wealthy New Yorkers. Among the many differences between Hillary Clinton and Donald Trump, China policy ranks very high.

How the winner in November manages America’s ties to China could have a big impact on U.S. jobs and growth. Discouraging reality No. 1: At this moment, neither candidate advertises a sound, constructive China policy. Discouraging reality No. 2: Clinton’s thinking on China is more developed than Trump’s but poses the bigger risk for precisely this reason.

Related: When Donald Trump Says We’re Losing to China, He’s Right About One Thing   

Clinton brings long years of experience to the complexities of U.S.–China relations, while Trump is patently a novice with more than a few mistaken preconceptions. Don’t let this common comparison mislead you.

Clinton, after all, has proved unable to learn from her misjudgments—of which there are many. Going into the 2016 election, ties between Washington and Beijing need repair, and much of the damage dates to Clinton’s years as President Obama’s first secretary of state. Clinton introduced an adversarial tone between the U.S. and China that the Chinese have not forgotten. This ranks among her biggest mistakes, and she promises to keep on making it.

Hostility between Washington and Beijing escalates as we speak, notably over questions of sovereignty and maritime jurisdiction in the South China Sea. Clinton did a lot to precipitate this, and as the Chinese recently signaled, at a certain point it’s going to spill over into the very densely interdependent economic relationship. 

Trump breathes fire on the China question, as he did last week in Cleveland, but he’s hardly the first political candidate to go after headlines. His professed ideas on two core issues he singles out—the trade deficit and the yuan-dollar exchange rate—count as little more than campaign-trail simplicities.

Trump’s record as a pragmatist counts more. This suggests he’ll make more room for improvement in U.S.–China ties than Clinton’s preference for confrontation.

Related: Why a Drop in the Overvalued Yuan Won’t Start a Currency War

And Trump is very right about one problem in the China relationship that Clinton all but ignores: By 2014, when the most recent study was published, the trade deficit with China, which was $336 billion last year (and now runs $41 billion a month), had cost more than 3 million American jobs; three-quarters of them were in manufacturing.

It’s always interesting to hold up the views of others as a mirror. And in this case, Beijing fears a Clinton presidency most: “Hillary is fierce when it comes to China,” a Chinese official told Reuters recently.

A Western diplomat sums it up well: “It would be very transactional for the Chinese,” he told the same Reuters correspondent. “He’s a businessman they think they’ll be able to strike a deal with.”

Clinton’s record on China is a straight line from good to bad. Soon after arriving at the State Department in 2009, she set up a Strategic and Economic Dialogue with China that does what its name implies: It brings strategic and security questions into the same conversation as the exceedingly complex economic relationship. This was right.

A year later, Clinton did a 180, and the dialogues have mattered little since. In a 2010 speech delivered in Hanoi she declared the South China Sea a “vital national interest” and asserted that the U.S. would mediate talks on questions of sovereignty and maritime jurisdiction. This was an open challenge to the Chinese, who had been pursuing bilateral settlements with their neighbors.

That speech tipped the scales in Washington toward those who favored confronting China rather than accommodating its rise as a Pacific power. This was very wrong, given China’s emergence, like it or not, is an inevitable feature of the 21st century.

Related: Why Beijing Won’t Back Down in the South China Sea

Clinton subsequently declared the administration’s “pivot to Asia.” This was another error, as the much-noted pivot swiftly evolved into a pair of adversarial policies: an explicit military challenge in the western Pacific and, on the economic side, a region-wide trade pact (the Trans–Pacific Partnership, still in negotiation) that pointedly excludes China.

This is Clinton’s legacy—a needlessly tense, disjointed relationship in which impossible dreams of continued American primacy in the western Pacific threaten to do serious damage to America’s very 21st century economic ties. The take-home: She promises to prolong this basic miscalculation if she wins the White House.

Trump has said little about mounting tensions in the South China Sea. But if his remarks about negotiating with the Russians are any guide, he’ll be more inclined than Clinton to try to resolve the issue through discussion.  

On other questions, Trump’s views await collisions with reality. The unknown is how he and his policy people will react when these collisions jar them, as they inevitably will. Charging Beijing with currency manipulation in the service of its export sector is hopelessly out of date. Eager to advance the yuan as reserve currency, the central bank has moved steadily toward a floating-rate system, as the International Monetary Fund noted last summer.

In November, the IMF announced the yuan will join the dollar, euro, pound, and yen in its basket of global currencies. In this case, Trump (along with many others) is fighting the last war.

Related: China Holds Combat Drill in the South China Sea

As to the trade deficit, Trump’s right to assert the related loss of American jobs can no longer be ignored. Plainly, it’s a potent political issue now, as it should be. But the deficit’s more complex than he seems to grasp. U.S. companies commit some $60 billion a year to mainland production, and many of these operations end up exporting electronics and other goods back into the U.S. market. The U.S., in short, has a piece of China’s export sector.

Further complicating the picture are China’s burgeoning investments in the U.S., which are intended partly to relieve pressure on the trade deficit. Finally, inside the trade deficit figure are $161 billion in U.S. exports to China.

Trump the presidential candidate needs to do his homework. Trump the dealmaker is certain to get around to it when he has to.