US-China Trump 2.0 blues

On Nov. 5, Donald Trump made a stunning comeback by beating Kamala Harris to become the 47th President of the United States. With the Republicans winning the presidency, the Senate, very probably the House and having a majority at the Supreme Court level, Trump has garnered formidable power to truly deal with some of the toughest domestic structural issues facing the United States. The Democratic Party will be licking its wounds to reflect why it lost so badly to someone the left-leaning loved to hate.

The last time around, Trump’s 2016-2020 first term was a roller-coaster of policy swings that riveted not only Americans, but also the rest of us. On foreign policy, however, there should be a few doubters that US-China rivalry will remain intense for years, if not decades to come.

First, Trump has declared that he will try to pause the Ukraine war, which suggests that he will leave the mess for Europe to deal with, leaving America free to concentrate on the Middle East and China. Second, last February, Trump threatened to increase tariffs of up to 60 percent on imports from China. On Taiwan, Trump announced on the Joe Rogan show that he did not like the CHIPS Act and accused Taiwan of stealing US semiconductor business.

Anyone interested in how the deep state (administrative bureaucracy) is totally focused on China should read the 2023 US National Defense Industrial Strategy (NDIS) report, which outlined full-spectrum competition and preparedness for open conflict with China in the future. As Deputy Secretary of Defense Kathleen Hicks stated in her preface, “we will prioritize coordinated efforts with the full range of domestic and international partners in the defense ecosystem to fortify the defense industrial base, our logistical systems, and relevant global supply chains against subversion, compromise, and theft.”

The origins of the NDIS stem from the realization that over the last three decades, China “became the global industrial powerhouse in many key areas—from shipbuilding to critical minerals to microelectronics—that vastly exceeds the capacity of not just the United States, but the combined output of our key European and Asian allies as well.” The Ukraine and Gaza wars demonstrated not only how modern warfare has been changed profoundly by unmanned weaponry such as drones, robots, and hypersonic missiles, but also the US and North Atlantic Treaty Organization allies lacked basic ammunition like 155mm artillery shells and highly sophisticated missile defense systems.

Essentially, the US has woken up to the fact that wars are won not just by arms, but also by the effectiveness of the whole defense industrial base, comprising not just government owned and operated defense production, private contractors, academia, and those of her allies. You cannot win if your troops are fighting with no ammunition, fuel, or equipment.

In simple terms, the NDIS aims to utilize not just whole-of-government, but also whole-of-economy private and academic institutions to upgrade the defense ecosystem. By broadening the defense industry to include private sectors, small and medium businesses, and also the ability to sanction the other side’s businesses, the US will spread its sanctions net wider and wider. That signals the end of free markets, because all global production of goods and services will be subject to national security scrutiny.

This raises the reciprocal question whether any foreign investor in US tech firms or business should be funding or investing in military technology that could be used against them? Since the US is borrowing largely from the rest of the world in US dollars to fund her deficits, would investing in US dollar assets be voluntary or subject to threats of 100 percent tariffs, as Trump has threatened?

A cynic would argue that so long as the tech company yields superior return on capital, especially as it also benefits from large US government defense contracts, then it is in one’s self-interest to invest in such assets. The moral side of investors with environmental, social, and governance principles may want to question whether he or she should fund such military ventures that could eventually escalate to existential nuclear war.

Reading the NDIS explains why the BRICS Summit, held in Kazan last month, endorsed efforts toward multilateralism and reforms of the Bretton Woods Institutions and the World Trade Organization. The summit did not mention the US dollar, but clearly disliked the “disruptive effect of unlawful unilateral coercive measures, including illegal sanctions on the world economy, international trade, and the achievement of the sustainable development goals.”

Trump 2.0 signals the continued drawing of lines between the West and the rest. The world desperately needs a period of peace and healing. Instead, brace yourself for a period when you wake up in the morning to find that you don’t know anymore where the driver is taking us. Batten the hatches for stormy times ahead. Asia News Network

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Andrew Sheng is former chair of the Hong Kong Securities and Futures Commission. The views expressed are entirely his own personal views.

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The Philippine Daily Inquirer is a member of the Asia News Network, an alliance of 22 media titles in the region.