From Beijing to Riyadh: Trump’s Blueprint for U.S. Dominance

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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• In his second term, President Trump is expected to adopt a tougher stance on China.
• China enters Trump’s second presidency economically weaker due to U.S. policies under Biden, COVID-related disruptions, and internal challenges.
• Trump is likely to reinvigorate the Abraham Accords, aiming to normalize relations between Israel and Arab states while countering Iranian influence.

Whatever China’s diplomatic rhetoric has been since it launched its ‘One Belt, One Road’ project in 2013 – officially re-translated into English in 2016 on Beijing’s insistence to the less totalitarian-sounding ‘Belt and Road Initiative’ (BRI) – the goal of the regime remains to challenge the U.S. as the world’s leading superpower. President Joe Biden is acutely aware of this and so was Donald Trump when he first took the top office in 2017. As President-elect again, Trump’s view has not changed but his approach to handling the U.S.’s major global superpower rival is likely to be different this time around, both from his previous strategy and from Biden’s.

During his previous term as president, Trump was privately criticised by some very senior members of his government and of the Republican Party for his handling of China – and especially its leader, Xi Jinping – on several occasions. Most serious of these accusations was that which was later made public by Trump’s former National Security Adviser, John Bolton, that the then-President “[gave up] security considerations for trade”. An early notable case in point had been the almost complete reversal of hard-hitting U.S. sanctions imposed on Chinese telecommunications company ZTE for committing major and repeated violations of the U.S.’s sanctions on Iran and North Korea. According to Bolton, after a private telephone call to President Xi – in which it transpired that Xi told Trump that he would “owe [Trump] a favour” if he reduced the sanctions against ZTE – Trump did exactly what Xi had asked for. Shortly after doing this, Trump tweeted: “President Xi of China and I are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!” As Bolton put it in his book on the first Trump Presidency, “Since when had we started to worry about jobs in China?”. Exactly the same methodology of personally flattering Trump and then offering him some vague commitment on China’s part to buy more of some product or another from the U.S. was again used by Xi to hold off Trump from imposing quick, full and irreversible sanctions on another company seen by the U.S. intelligence community as being a Chinese intelligence-gathering operation working under the guise of a telecoms corporation, Huawei.

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It is often assumed that with the present-day Republican Party shaped in Trump’s image and now controlling the Senate, the House of Representatives and the Supreme Court, the new president can afford not care about such criticism. This may be true, but he does care anyway, according to multiple sources who worked closely with him in his first presidency, exclusively related to OilPrice.com. “Like all of us, he thinks of himself in a certain way, and these types of comments [implying susceptibility to manipulation by others] do not fit that view [of himself], so he won’t be doing the same thing again,” said one former senior source in his first Presidential Administration last week. “He genuinely believes America is the greatest country in the world, wants it to stay that way, and won’t be doing anything that calls either of those things into question,” the source added. If anything, such criticism may play a part in a harder – and more direct — line to be taken toward China than was taken under Joe Biden’s presidency.

The basic objective of both men’s presidencies was to reduce the dramatic economic imbalance in dealings between the U.S. and China that have for years enormously favoured the latter. Both presidential administration’s also knew that by reducing the economic wellspring that this created for China its ability to expand its geopolitical influence across the world would also be decreased, as analysed in full in my latest book on the new global oil market order. It was always Biden’s intention early on in his presidency to implement two core measures that were broadly aimed at achieving the core objective (and the corollary one), aside from never trading security considerations for commercial opportunities. First, U.S. companies would no longer be allowed to sign any contracts with Chinese companies that included any element of sharing technology. For decades, China had insisted that any U.S. company that wanted to do business with it must share its technology with its Chinese partner. This had allowed it to systematically reverse engineer everything that was shared and then to re-sell China-made versions back to the U.S. and the rest of the world at much lower prices, given the much lower unit cost of labour in China than in the U.S. The practice had been one of the keys to the creation of such huge trade surpluses for China and deficits for everyone else. For various reasons, these measures were never fully implemented by the Biden team, although some of the policies implemented under his administration have reduced China’s economic might over the previous few years, albeit with the help of the effects of Covid and China’s Draconian ‘Zero-Covid’ containment policy, as also detailed in my latest book.

Consequently, Trump will begin his second presidency with an economically weaker China than he did in his first term. Back even then, he described China as a ‘strategic competitor’ and imposed tariffs on many Chinese imports to the U.S. This time around he mentioned during his campaign imposing new tariffs of 10-20 percent on most foreign goods, with China possible facing an additional 60 percent charge. He also pledged to cut the U.S.’s trade deficit. These promises are inextricably linked in the narrative of many of his voters to protecting American jobs in and related to its once-mighty manufacturing sector, and Trump is likely to be unwilling to break this tacit assurance. Additionally, given the increasing economic strains for China of continuing to roll-out its multi-generational power-grab project, the BRI, across the Middle East at the same pace as before Covid struck, Trump may decide to push ahead on a new cycle of Abraham Accords sooner rather than later. Under these relationship normalisation deals between Israel and various Arab states beginning in August 2020, Trump was able to establish the basis for a new era of cooperation across the region that was not focused on military intervention. Indeed, he stated on the campaign trail that resuscitating this deal type would be a foreign policy priority for his team.

Now, as then, the success of such an initiative will depend in large part on how secure from the Iranian threat the surrounding countries of the Middle East feel. A key part of the reason why the U.S. unilaterally withdrew in May 2018 from the Joint Comprehensive Plan of Action’ (JCPOA, or colloquially ‘the nuclear deal’) was that Trump believed Iran was cynically using the agreement to quietly build up its nuclear weapons programme from money accrued through the deal’s associated increased trade and investment, as also analysed in full in my latest book. This, and the promises of increased protection for countries participating in the Abraham Accords, was the main reason why the process began to develop a positive momentum of its own among Arab states. The aim at that time was to conclude such a deal with Saudi Arabia too – the other great regional power – after the eventual death of the reigning monarch, King Salman bin Abdulaziz Al Saud. His successor, Crown Prince Mohammed bin Salman, was widely believed among Trump’s inner circle to be in favour of such a deal. It was only after Trump had left office that Saudi Arabia felt insecure enough to be persuaded by China to conclude an (uneasy) relationship resumption deal with Iran.

By Simon Watkins for Oilprice.com

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