President Trump has used his executive power to take a hatchet to 40 years of America’s China policy. His administration has called for a “whole-of-government” approach to counter Beijing’s unfair economic practices, initiated a damaging trade war, banned Chinese telecommunication equipment from domestic networks, and implemented stringent regulations to vet Chinese investments in sensitive industries.
In a novel development, the administration has begun coaxing individual states to aid the federal government in its anti-China fervor. Speaking to the National Governors Association in early February, Secretary of State Mike Pompeo warned that “competition with China is not just a federal issue…It’s happening in your states with consequences for our foreign policy, for the citizens that reside in your states, and indeed, for each of you.”
The administration’s enlisting of states in the broader U.S.-China competition has significant economic implications for subnational actors. Increasingly hawkish incumbents, as well as congressional candidates, could provoke economic pushback from Beijing. Many of these officials have bought into the Republican Party’s strategy of carrying out an “anti-China assault” on the campaign trail, scapegoating Beijing for the coronavirus outbreak in the United States instead of acknowledging the Trump administration’s central role in the country’s failure to prepare itself properly.
While Washington is correct to scrutinize Chinese investments in sensitive technologies and pursue reciprocal trade and economic relations, politically motivated, opportunistic anti-China rhetoric could threaten individual states’ cooperation with China, one of the few remaining productive aspects of the bilateral relationship. Indeed, as Hu Xijin, editor of Chinese tabloid Global Times, tweeted, “Beijing is already preparing to take necessary punishment measures against some members of the US Congress, the state of Missouri, and relevant individuals and entities.”
China-skeptic sentiment in the U.S. government and on the campaign trail is not a new phenomenon, but the coronavirus pandemic and resultant economic crisis have afforded many politicians the cover to push hawkish policies. Some of their proposals would benefit the United States, including reducing U.S. reliance on Chinese-made pharmaceutical products, a motion broadly backed by both Republicans and Democrats. But many of their arguments are politically motivated and risk further inflaming U.S.-China tensions and painting Beijing as an enemy, à la the Soviet Union during the Cold War, rather than a competitor.
Senator Tom Cotton made waves last month by arguing that U.S. universities should not accept Chinese STEM students given the chance they might return home and use their training to drive China’s scientific advances. Senators Josh Hawley and Marco Rubio have also joined the fray, advocating that the United States reduce its reliance on China and punish the country for failing to contain the COVID-19 outbreak. The attorneys general of Missouri and Mississippi have filed lawsuits seeking damages from Beijing for the coronavirus.
Incumbents, however, are not the only ones wagering their political futures on China. Senate candidates in Tennessee, Arizona, and Alabama, among other states, have adopted overtly hawkish stances toward Beijing, blaming China for the pandemic, painting their opponents as soft on the country, and using the China threat to push anti-immigration policies.
Amid Washington’s anti-China turn, preserving cooperation at the state level will be critical to maintaining any semblance of productive bilateral ties going forward. As Los Angeles Deputy Mayor of International Affairs Nina Hachigian said at a Brookings panel last year, “cities and states…can take advantage of the trade, investment, students, climate change cooperation, culture, and tourism China offers without really having to balance the broader national security, geopolitical, and human rights questions.”
It is no coincidence that three of the past four U.S. Ambassadors to Beijing previously served as governors of states with deep links to China: Terry Branstad (Iowa), Gary Locke (Washington), and John Huntsman (Utah).
The aforementioned politicians may be fighting to relocate supply chains outside of mainland China and decouple vast sections of the two countries’ economies, but their rhetoric may also lead Beijing to move Chinese-owned businesses out of the United States or cut imports from the country. Despite bilateral tensions, there is clear evidence that Chinese investments in the United States can be beneficial. In the midst of the trade war, a Chinese takeover of a failing paper mill in Maine helped revitalize a local community. In Tennessee, Chinese investments in automotive parts, mattresses, and porcelain manufacturing have benefited the state’s economy. There is a real risk that Chinese companies, seeing both politicians’ and the American public’s growing distaste for China, could simply up and leave.
A more likely outcome of the growing antagonism, however, is for Beijing to engage in economic coercion, which it uses to try to force nations, companies, and officials into doing its bidding and punish those who do not. The Chinese Communist Party (CCP) has developed a wide-ranging and flexible toolkit of coercive measures that it has used strategically throughout the world.
When South Korea agreed to host the United States’ Terminal High Altitude Area Defense (THAAD) missile defense system, Beijing did not impose tariffs on Seoul despite its displeasure. China instead restricted flights to South Korea, drummed up nationalist sentiment among the Chinese public to boycott South Korean goods, and even shut down China-based outlets of Lotte Group, the Korean company on whose land THAAD was installed.
China took a similar approach with the Philippines following a 2012 dispute over claims in the South China Sea. In order to cause significant economic pain, Beijing tightened quality controls on agriculture exports from Manila while stemming the flow of Chinese tourists to the Philippines. And most recently, Beijing threatened and then followed through on a boycott of Australian beef after Canberra called for an independent investigation into the origins of the coronavirus.
Beijing coerces not only countries but also private companies for perceived transgressions. Marriott, Delta Airlines, and Zara all faced the prospect of losing business in China after listing Taiwan, Hong Kong, or Tibet as sovereign nations. Last fall, Beijing suspended broadcasts of NBA games after Houston Rockets general manager Daryl Morey tweeted his support for pro-democracy protestors in Hong Kong.
If public sentiment across the United States continues to turn against China, Beijing may begin adapting its methods of economic coercion to retaliate against states and politicians it perceives as hostile to its interests.
Indeed, China is clearly paying attention to U.S. domestic politics and state officials’ views of China. A think tank in Beijing recently ranked all 50 governors on their attitudes toward China, information the CCP values as it attempts to mold the views of officials outside of Washington. As Dan Blumenthal has noted, Beijing “split[s] Americans into ‘friends of China’ who might lobby on their behalf and others who refuse to do so [and] will not be granted access to China’s massive market.”
In recent years, Beijing has provided glimpses of what economic coercion in the United States might look like. During the initial stages of the trade war, China’s retaliatory tariffs disproportionally targeted Red states critical to Trump’s 2016 election victory. Furthermore, China identified key officials able to influence U.S. policy, such as then-Wisconsin Representative Paul Ryan and Senate Majority Leader Mitch McConnell, and levied tariffs that threatened jobs in and exports from their states in a bid to pressure the politicians to split with Trump.
These actions are possible harbingers of economic pressures to come. Beijing may be tempted to pressure local officials to influence policy from the bottom up. As the aforementioned think tank report explicitly notes, Beijing believes that “State-level officials ‘enjoy a certain degree of diplomatic independence,’” and that “Governors can ignore orders from the White House.”
Recent downturns in public opinion in both countries, the result of several years of increasing competition, and an emerging view that the other views the pandemic as a strategic opportunity, could even see Beijing move beyond tariffs and drum up anti-U.S. sentiment. It could even encourage citizens to boycott American products, the political and economic effects of which could be devastating.
While the United States imports more from China than it exports, China-bound exports supported around one million U.S. jobs in 2018. According to the U.S.-China Business Council, 42 states counted China among their top five export destinations in 2019. Chinese FDI, which peaked at $46.5 billion in 2016, dropped to just over $3 billion in 2019 — a decline of over 90 percent. Industries ranging from energy, agriculture, and manufacturing could be negatively affected by an exodus of Chinese investment, a freeze on new Chinese FDI into the United States, or increased tariffs on or bans of imports.
Given the astronomically high unemployment rate and ballooning federal and state debt levels, U.S. states are in no position to lose more investments or export-supporting jobs. Senator McConnell’s recent call for states to file bankruptcy highlights their increasingly gloomy economic prospects, and already over 25 percent of state revenues have disappeared due to the coronavirus.
The United States certainly needs to diversify its supply chains so as not to depend so much on China. Washington has already rolled out several measures to better screen Chinese investments in the country and limit sensitive technology exports. The increasingly prevalent and politically expedient one-size-fits-all anti-China position espoused by many state-level politicians, however, could endanger China-state ties, the locus of the two countries’ economic relationship, and threaten China-owned U.S.-based companies that pose no national security threats and provide hundreds of thousands of jobs.
Lucas Tcheyan is a research analyst at the Carnegie–Tsinghua Center for Global Policy, based in Beijing, China. He researches and writes on Chinese foreign policy issues, including Asia-pacific security developments, U.S.-China relations, nuclear proliferation on the Korean peninsula, and China’s development policy. Prior to joining Carnegie, Lucas was an analyst at Goldman Sachs working in New York City.
On Tuesday, U.S. Treasury Secretary Janet Yellen strongly endorsed efforts to tap frozen Russian central bank assets in order to continue to fund Ukraine.
“There is a strong international law, economic and moral case for moving forward,” with giving the assets, which were frozen by international sanctions following Russia’s 2022 invasion of Ukraine, to Kyiv, she said to reporters before a G7 meeting in San Paulo.
Furthermore on Wednesday, White House national security communications adviser John Kirby urged the use of these assets to assist the Ukrainian military.
This adds momentum to increasing efforts on Capitol Hill to monetize the frozen assets to assist the beleaguered country, including through the “REPO Act,” a U.S. Senate bill which was criticized by Senator Rand Paul (R-Ky.) in a recent article here in Responsible Statecraft. As Paul pointed out, spending these assets would violate international law and norms by the outright seizure of sovereign Russian assets.
In the long term, this will do even more to undermine global faith in the U.S.-led and Western-centric international financial system. Doubts about the system and pressures to find an alternative are already heightened due to the freezing of Russian overseas financial holdings in the first place, as well as the frequent use of unilateral sanctions by the U.S. to impose its will and values on other countries.
The amount of money involved here is considerable. Over $300 billion in Russian assets was frozen, mostly held in European banks. For comparison, that’s about the same amount as the entirety of Western aid committed from all sources to Ukraine since the beginning of the war in 2022 — around $310 billion, including the recent $54 billion in 4-year assistance just approved by the EU.
Thus, converting all of the Russian assets to assistance for Ukraine could in theory fully finance a continuing war in Ukraine for years to come. As political support for open-ended Ukraine aid wanes in both the U.S. and Europe, large-scale use of this financing method also holds the promise of an administrative end-run around the political system.
But there are also considerable potential downsides, particularly in Europe. European financial institutions hold the overwhelming majority of frozen Russian assets, and any form of confiscation could be a major blow to confidence in these entities. In addition, European corporations have significant assets stranded in Russia which Moscow could seize in retaliation for the confiscation of its foreign assets.
Another major issue is that using assets to finance an ongoing conflict will forfeit their use as leverage in any a peace settlement, and the rebuilding of Ukraine. The World Bank now estimates post-war rebuilding costs for Ukraine of nearly $500 billion. If the West can offer a compromise to Russia in which frozen assets are used to pay part of these costs, rather than demanding new Russian financing for massive reparations, this could be an important incentive for negotiations.
In contrast, monetizing the assets outside of a peace process could signal that the West intends to continue the conflict indefinitely.
In combination with aggressive new U.S. sanctions announced last week on Russia and on third party countries that continue to deal with Russia, the new push for confiscation of Russian assets is more evidence that the U.S. and EU intend to intensify the conflict with Moscow using administrative mechanisms that won’t rely on support from the political system or the people within them.
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Activist Layla Elabed speaks during an uncommitted vote election night gathering as Democrats and Republicans hold their Michigan presidential primary election, in Dearborn, Michigan, U.S. February 27, 2024. REUTERS/Rebecca Cook
A protest vote in Michigan against President Joe Biden’s handling of the war in Gaza dramatically exceeded expectations Tuesday, highlighting the possibility that his stance on the conflict could cost him the presidency in November.
More than 100,000 Michiganders voted “uncommitted” in yesterday’s presidential primary, earning 13.3% of the tally with most votes counted and blasting past organizers’ goal of 10,000 protest votes. Biden won the primary handily with 81% of the total tally.
The results suggest that Biden could lose Michigan in this year’s election if he continues to back Israel’s campaign to the hilt. In 2020, he won the state by 150,000 votes while polls predicted he would win by a much larger margin. This year, early polls show a slight lead for Trump in the battleground state, which he won in 2016 by fewer than 11,000 votes.
“The war on Gaza is a deep moral issue and the lack of attention and empathy for this perspective from the administration is breaking apart the fragile coalition we built to elect Joe Biden in 2020,” said Rep. Pramila Jayapal (D-Wash.), a progressive leader who has called for a ceasefire in Gaza, as votes came in last night.
Biden still has “a little bit of time to change this dynamic,” Jayapal told CNN, but “it has to be a dramatic policy and rhetorical shift from the president on this issue and a new strategy to rebuild a real partnership with progressives in multiple communities who are absolutely key to winning the election.”
Rep. Ro Khanna, a prominent Biden ally, told Semafor the vote is a “wake-up call” for the White House on Gaza.
The “uncommitted” option won outright in Dearborn, a Detroit suburb with a famously large Arab American population. The protest vote also gained notable traction in college towns, signaling Biden’s weakness among young voters across the country. “Uncommitted” received at least 8% of votes in every county in Michigan with more than 95% of votes tallied.
The uncommitted campaign drew backing from prominent Democrats in Michigan, including Rep. Rashida Tlaib (D-Mich.) and state Rep. Abraham Aiyash, who is the majority leader in the Michigan House. Former Reps. Andy Levin and Beto O’Rourke, who served as a representative from Texas, also lent their support to the effort.
“Our movement emerged victorious tonight and massively surpassed our expectations,” said Listen to Michigan, the organization behind the campaign, in a statement last night. “Tens of thousands of Michigan Democrats, many of whom [...] voted for Biden in 2020, are uncommitted to his re-election due to the war in Gaza.”
Biden did not make reference to the uncommitted movement in his victory speech, but reports indicate that his campaign is spooked by the effort. Prior to Tuesday’s vote, White House officials met with Arab and Muslim leaders in Michigan to try to assuage their concerns about the war, which has left about 30,000 Palestinians dead and many more injured. (More than 1,100 Israelis died during Hamas’s Oct. 7 attacks last year.)
The president argues that his support for Israel has made it possible for him to guide the direction of the war to the extent possible, though his critics note that, despite some symbolic and rhetorical moves, he has stopped far short of holding back U.S. weapons or supporting multilateral efforts to demand a ceasefire.
Campaigners now hope the “uncommitted” effort will spread to other states. Minnesota, which will hold its primaries next week, is an early target.
“If you think this will stop with Michigan you are either the president or paid to flatter him,” said Alex Sammon, a politics writer at Slate.
Meanwhile in the Republican primary, former President Donald Trump fended off a challenge from former South Carolina governor Nikki Haley. With 94% of votes in, Trump came away with 68% of the vote, while Haley scored around 27%.
The Russian conquest of Avdiivka is unlikely to alter the war’s basic realities. Although delays in the delivery of aid to Ukraine have raised Russian hopes, no meaningful changes on the battlefield are near. The Russians cannot drive to Kyiv; the Ukrainians cannot eject the invaders.
The first phase of the war in Ukraine is drawing to a close. Both sides are coming closer to acknowledging what has been clear to the rest of the world for quite some time: the current stalemate is unlikely to be broken in any significant way. This round of the war is going to end more-or-less along the current front lines.
The actions taken in the next few years will determine whether or not there will be a round two.
The war’s end state is now clear, even if it may take a bit more time for the combatants to accept it. Russian President Vladimir Putin’s barbaric invasion has failed, but Ukraine cannot return to the status quo ante. The only questions that remain concern the shape of the peace to come, and how best to avoid a second act in this pointless tragedy.
Loud voices in the West are already suggestingthatthe best way to avoid round two is for NATO to expand again, and bring Ukraine into the alliance. NATO Secretary General Jens Stoltenberg, on Kyiv's membership to the alliance, said over the weekend, "Ukraine is now closer to NATO than ever before...it is not a question of if, but of when."
He said Nato was helping Kyiv to make its forces “more and more interoperable” with the defence alliance and would open a joint training and analysis centre in Poland. “Ukraine will join Nato. It is not a question of if, but of when,” he insisted.
If this is the path the alliance follows, future fighting is almost assured. One side’s deterrent is often the other’s provocation.
NATO expansion was a necessary condition for Putin’s invasion of Ukraine. It was not sufficient, since Putin has agency and made a catastrophically bad choice, but it was necessary. Those in the West who blame the United States for the war are as myopic as those who claim that Western policies had nothing to do with it. Putin remains a cold warrior at heart, and talked about NATO obsessively in the years leading up to the invasion.
Expanding NATO further would again provide the necessary conditions for tension and conflict. Russia will not stand by while Ukraine joins the enemy camp. A second invasion – perhaps before Ukraine formally joined the alliance, or perhaps afterwards – would be extremely likely. Those who suggest that deterrence would keep the Russians in check should listen to the rambling interview Putin just gave to Tucker Carlson. Ukraine simply matters more to the Russians than it does to us. Putin would calculate that no American president would be willing to sacrifice New York for Kyiv.
Another solution exists, one that might well assure Kyiv’s security without exacerbating Russian paranoia. Ukraine should be “Finlandized.”
During the Cold War, Finland was essentially a neutral country. It took no official positions on the pressing issues of the day, and was careful not to criticize the Soviet Union. Leaders in Helsinki made it clear to those in Moscow that they had no desire to join the West. They resisted pressure to join both NATO and the Warsaw Pact, and discouraged their citizens from openly criticizing either side. Finland avoided the Soviet embrace by making it clear that it would avoid the West as well.
“Finlandization” was a forced neutrality. The term was often used in a pejorative sense during the Cold War, as a warning about what could happen to the rest of Europe if the United States was not careful. What was often overlooked at the time was just how well Finlandization worked out for the people of Finland, who managed to stay free and outside of the various Cold War crises. Perhaps it is not a coincidence that today Finns consistently rank among the world’s happiest people.
Finlandization was a recognition of geopolitical reality, and it was the best choice for a small nation with the misfortune to lie next to a superpower. Switzerland followed a similar path during the 1930s. Like the Finns, the Swiss realized that their independence and very survival depended on avoiding any perception of flirtation with the enemies of their neighbor.
Ukraine will soon find itself in a similar situation, beside an aggressive and unpredictable great power. It should make the same choice, and the United States should help it do so.
A Finlandized Ukraine would not be allowed to join the West, but neither would it come under Russia’s thumb. It would be neutral, a buffer zone between NATO and Russia, an independent state that would allow hawkish Russians to imagine that it is still part of their country. The Ukrainian people would be neutral, and therefore safe.
If Washington were to lead an effort to emphasize the enduring neutrality of Ukraine, to Finlandize it, Russia’s paranoia could be reassured rather than provoked. Finlandizing Ukraine would be the best outcome for all involved, including for the Ukrainian people. The disappointment in being excluded from NATO would be tempered by the knowledge that it puts them on their best path to peace and stability. And it would be the best way to avoid Ukrainian War Two.