In a highly-anticipated speech Monday, the Biden administration’s top trade official, Katherine Tai, outlined a new policy on trade with China following a comprehensive, months-long review. In fact, the biggest takeaway from the speech is that there is not really a new approach at all –- tariffs on roughly $250 billion worth of imports left in place by the Trump administration are here to stay, with no indication if or when they might be lifted.
This does not mean that talks between the two sides are dead, or that there is no hope of progress at some point in the future. Following a five-month hiatus, Tai will hold talks with her Chinese counterpart Liu He in the coming days, when the two will discuss Beijing’s progress in meeting the terms of the “phase one” trade deal struck by the Trump administration in January last year. That deal, parts of which are set to expire by the end of December, saw Beijing commit to $200 billion worth of additional imports from the United States, as well as progress on intellectual property protections and forced technology transfer.
The U.S. Trade Representative’s commitment to continued dialogue, and the fact that she did not accuse China of outright failing to live up to the deal, was received warmly by some in Beijing, reported the Wall Street Journal.
Where the trade relationship goes from there depends on the nature of those talks and how satisfied Washington is with Beijing’s progress on its commitments, Tai said. In the meantime, tariffs are to remain in place as a source of leverage, and could be bolstered by additional rounds as deemed necessary. Both Tai and other administration officials, speaking on background to the press, repeatedly stressed that “we are not taking any tools off the table” as they navigate the coming months. However, Tai did address one major concern among the U.S. business community by announcing that a targeted, tariff-exemption process would be reestablished to “ensure that the existing enforcement structure optimally serves our economic interests.”
Beyond enforcing the phase one deal, Tai offered only small hints at where the administration’s long-term thinking lies. She noted that the deal “did not meaningfully address the fundamental concerns that we have with China’s trade practices and their harmful impacts on the U.S. economy,” pointing in particular to Beijing’s widespread use of industrial subsidies. These broader sticking points would be raised in Tai’s upcoming dialogue with Liu, but the administration has no plans to enter another round of negotiations to realize something like a “phase two” deal, one of the unnamed senior officials who briefed the press Monday told reporters.
This is partly because “we recognize that China simply may not change and that we have to have a strategy that deals with China as it is, rather than as we might wish it to be,” the official continued. Referring to future engagement on issues such as industrial subsidies, Tai said that “our objective is not to inflame trade tensions with China” –- a welcome statement which seems to recognize that securing deeper reforms to China’s economic model would require even more destabilizing pressure than has already been brought to bear.
Rather, Washington needs “a new, holistic, and pragmatic approach in our relationship with China” that charts “a new course to change the trajectory of our bilateral trade dynamic,” said Tai. She did not go into much detail on what exactly this might entail, beyond reiterating the administration’s well-worn desire to engage China from a “position of strength” by working hand-in-hand with U.S. allies and partners while investing in the sources of economic competitiveness at home through infrastructure and innovation policies. Some in Beijing received this part of the speech negatively, another sign of American arrogance, said the Wall Street Journal.
This raises two possibilities for the future. First, Beijing could follow through on its phase one commitments, at least to a degree that meaningfully satisfies the Biden administration. This could open up space for the two sides to chart out what the post-phase-one status quo should look like –- which would likely include the elimination of most if not all of the remaining tariffs, along with possible compromises from Beijing on its use of industrial subsidies.
The more likely outcome is that the two sides do not reach such a modus vivendi, either because Beijing fails or chooses not to fulfill the phase one deal, it proves too committed to its industrial and state-centric policies for Washington’s liking, or tensions in other areas of the relationship poison any substantial progress on trade. In this scenario, the two sides could reach a cold truce, including the possibility that some tariffs remain in place for the foreseeable future, while the Biden administration shifts away from trying to change China’s behavior to a more modest strategy centered on adaptation and mitigation.
Tai’s remarks offered some indication that this is where the administration’s thinking is headed. She put forward a new phrase to frame the future of the trade relationship -- “durable coexistence” -- and said this would require “taking all steps necessary to protect ourselves against the waves of damage inflicted over the years through unfair competition.” Tai added that “we need to be prepared to deploy all tools and explore the development of new ones, including through collaboration with other economies and countries.”
The upsides of the first outcome are obvious: removing tariffs would allow trade to return to normal and eliminate a major irritant for Beijing, thereby creating a source of momentum and goodwill that might allow for progress and a cooling of tensions in other areas of the relationship. But, overlooking the possibility that some tariffs might remain, there are some hidden upsides in the second outcome as well.
Setting out on a crusade to fundamentally alter China’s economic model was not only always going to be a difficult, costly, and losing battle, but also a contradictory one. The United States has found itself in a heated debate since the 2016 election about the type of economic model it wants to pursue in an era of rising inequality and declining opportunity. Mainstream figures in both political parties have warmed to the idea of greater state involvement in the economy as one solution, while the Biden administration itself has embraced exactly what it criticizes China for using: state-driven industrial policies.
In this soul-searching context, it never made sense for Washington to be imposing standards on China or anyone else, and even less sense for China to accept or submit to them. And more broadly, insofar as Chinese power is going to be a permanent fact of life, finding less confrontational and ambitious means of adapting to that reality rather than resisting it would be a good organizing principle for U.S. policy towards China in general.
However, the devil is in the details on whether the approach hinted at by Tai would indeed help heal the U.S.-China relationship, or end up harming it. Last week, Commerce Secretary Gina Raimondo told CNBC that “If we really want to slow down China’s rate of innovation, we need to work with Europe.” If adapting to a new status quo of “durable coexistence” includes building out coalitions that seek to exclude, isolate, or “slow down” China’s economy, then this effort will become just another front in the emerging “new Cold War.” If, on the other hand, this approach seeks to create space for genuine coexistence, then it could be a key step toward slowing down the drift toward that Cold War.
Ethan Paul is a Research Fellow at the Quincy Institute for Responsible Statecraft. He was previously a reporter for the South China Morning Post in Hong Kong, where he covered U.S.-China relations and the city’s response to COVID-19.
Jiangxi province of eastern China: workers in the electric fan assembly line of AIRMATE Co., Ltd., the company's exports of electrical products to the United States. (Humphery/Shutterstock)|(engineer studio/shutterstock)
Ukraine would consider inviting Russian officials to a peace summit to discuss Kyiv’s proposal for a negotiated end to the war, according to Andriy Yermak, the Ukrainian president’s chief of staff.
“There can be a situation in which we together invite representatives of the Russian Federation, where they will be presented with the plan in case whoever is representing the aggressor country at that time will want to genuinely end this war and return to a just peace,” Yermak said over the weekend, noting that one more round of talks without Russia will first be held in Switzerland.
The comment represents a subtle shift in Ukrainian messaging about talks. Kyiv has long argued that it would never negotiate with Russian President Vladimir Putin, yet there is no reason to believe Putin will leave power any time soon. That realization — along with Ukraine’s increasingly perilous position on the battlefield — may have helped force Kyiv to reconsider its hard line on talking with the widely reviled Russian leader.
Zelensky hinted at a potential mediator for talks following a visit this week to Saudi Arabia. The leader “noted in particular Saudi Arabia’s strivings to help in restoring a just peace in Ukraine,” according to a statement from Ukrainian officials. “Saudi Arabia’s leadership can help find a just solution.”
Russia, for its part, has signaled that it is open to peace talks of some sort, though both Kyiv and Moscow insist that any negotiations would have to be conducted on their terms. The gaps between the negotiating positions of the two countries remain substantial, with each laying claim to roughly 18% of the territory that made up pre-2014 Ukraine.
Ukraine’s shift is a sign of just how dire the situation is becoming for its armed forces, which recently made a hasty retreat from Avdiivka, a small but strategically important town near Donetsk. After months of wrangling, the U.S. Congress has still not approved new military aid for Ukraine, and Kyiv now says its troops are having to ration ammunition as their stockpiles dwindle.
Zelensky said Sunday that he expects Russia to mount a new offensive as soon as late May. It’s unclear whether Ukrainian troops are prepared to stop such a move.
Even the Black Sea corridor — a narrow strip of the waterway through which Ukraine exports much of its grain — could be under threat. “I think the route will be closed...because to defend it, it's also about some ammunition, some air defense, and some other systems” that are now in short supply, said Zelensky.
As storm clouds gather, it’s time to push for peace talks before Russia regains the upper hand, argue Anatol Lieven and George Beebe of the Quincy Institute, which publishes Responsible Statecraft.
“Complete victory for Ukraine is now an obvious impossibility,” Lieven and Beebe wrote this week. “Any end to the fighting will therefore end in some form of compromise, and the longer we wait, the worse the terms of that compromise will be for Ukraine, and the greater the dangers will be for our countries and the world.”
In other diplomatic news related to the war in Ukraine:
— Hungary finally signed off on Sweden’s bid to join NATO after the Swedish prime minister met with Hungarian Prime Minister Viktor Orban in Budapest, according to Deutsche Welle. What did Orban get for all the foot dragging? Apparently just four Swedish fighter jets of the same model that it has been purchasing for years. The prime minister blamed his party for the slow-rolling, saying in a radio interview prior to the parliamentary vote that he had persuaded his partisans to drop their opposition to Sweden’s accession.
— French President Emmanuel Macron sent allies scrambling Tuesday when he floated the idea of sending NATO troops to Ukraine, according to the BBC. Leaders from Germany, the United Kingdom, Italy, Poland, and other NATO states quickly swatted down the idea that the alliance (or any individual members thereof) would consider joining the war directly. Russia said direct conflict with NATO would be an “inevitability” if the bloc sent troops into Ukraine.
— On Wednesday, Zelensky attended a summit in Albania aimed at bolstering Balkan support for Ukraine’s fight against Russia, according to AP News. The Ukrainian leader said all states in the region are “worthy” of becoming members of NATO and the European Union, which “have provided Europe with the longest and most reliable era of security and economic development.”
— Western officials were in talks with the Kremlin for a prisoner swap involving Russian dissident Alexei Navalny prior to his death in a Russian prison camp in February, though no formal offer had yet been made, according to Politico. This account contrasts with the one given by Navalny’s allies, who claimed that Putin had killed the opposition leader in order to sabotage discussions that were nearing a deal. Navalny’s sudden death has led to speculation about whether Russian officials may have assassinated him, though no proof has yet surfaced to back up this claim. There is, however, little doubt that the broader deterioration of the dissident’s health was related to the harsh conditions he was held under.
U.S. State Department news:
In a Tuesday press conference, State Department spokesperson Matthew Miller said the situation on the frontlines in Ukraine is “extremely serious.” “We have seen Ukrainian frontline troops who don’t have the ammo they need to repel Russian aggression. They’re still fighting bravely. They’re still fighting courageously,” Miller said. “They still have armor and weapons and ammunition they can use, but they’re having to ration it now because the United States Congress has failed to act.”
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Janet Yellen, United States Secretary of the Treasury. (Reuters)
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 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%.