Impending Changes in the U.S.-China Relationship and Regional Implications

Reaffirming and strengthening U.S.-Japan relations

Following President Trump’s inauguration, Prime Minister Ishiba was the second international leader to visit President Trump—an act that clearly demonstrates and reaffirms the importance of U.S.-Japan relations. The statement jointly issued by the two leaders included a phrase with significant meaning about “a new golden age” in U.S.-Japan relations that upholds a free and open Indo-Pacific as well as peace and prosperity in today’s violent and disorderly world. During the Reagan administration, U.S. Ambassador to Japan Mike Mansfield said that the U.S.-Japan relationship is the most important bilateral relationship in the world, bar none. This is still true today, as reaffirmed in the statement by President Trump and Prime Minister Ishiba.

The three key aspects of Trump’s vision: reciprocity, reindustrialization, and real estate

Three concepts beginning with the letter R are shaping President Trump’s worldview: reciprocity, reindustrialization, and real estate. Reciprocity is an idea mentioned frequently during his first term that will likely become even more prominent. It relates not only to trade relations but also to national security ties between the United States and other countries. The President will probably pursue a tariff approach based on this concept, but it is still unclear what this will look like in practice.

Regarding reindustrialization, the first Trump administration aimed to move foreign investment away from China toward other markets. The goal was to reduce dependency on China for critical imports, from advanced electronics to medical equipment and pharmaceuticals, as well as rare earths and other critical minerals that are key to the United States’ military and commercial supply chains. In his second term, it is unlikely that President Trump will be satisfied with investment merely moving away from China. His aim is not for Vietnam, Mexico, or India to become the new major suppliers for the United States but instead wants the majority of investment to come back to the United States itself. For this reason, he views tariffs as his most important tool of statecraft to achieve this goal of reindustrialization.

Amid this attempt to reindustrialize, the United States—even as the world’s largest economy—will still depend on other countries for significant parts of its supply chains. Even as Trump seeks to onshore or re-shore manufacturing to the United States, there will be many opportunities for Japan and the United States to work together to ensure that both countries are not dependent on adversaries for critical imports.

President Trump spent much of his career as a real estate developer, so real estate is the third area. In his inaugural address, he said the United States should be considered a growing country, one that expands its territory. This is probably not meant metaphorically, as President Trump is focused on the idea of achieving U.S. sovereignty over Greenland. He has also talked about the United States taking back the Panama Canal and developing the Gaza Strip.

International security challenges and the role of Taiwan and China

President Trump believes that economic security is national security. This phrase was used frequently during the first Trump administration and has been revived now. The most important potential conflict in the world right now is actually not Ukraine or the Middle East, but Taiwan. If Taiwan were to be annexed through war or other coercive means against the will of the people of Taiwan by the People’s Republic of China, much of the industrialized world, including Japan and the United States, would face a dual crisis of national security and economic prosperity.

This will be the most important matter that President Trump addresses during his time in office. During his first term, President Trump aligned with previous presidents in wanting to preserve the status quo of a peaceful situation between the People’s Republic of China on the one hand and the Republic of China, or Taiwan, on the other. However, if he does not deter Xi Jinping, the world will be facing an economic shock reminiscent of the 1929 stock market crash that led to the Great Depression. It remains to be seen what measures would be necessary to deter Beijing and how President Trump’s policy toward China will develop, but this is the single most important issue that people often forget about. In conclusion, the global community may face a major crisis in the next few years.

Comments

UCHINO Masahiko:
President Trump has set a new tone for U.S. foreign policy, which significantly influences global dynamics. It was fortunate that Japan was one of the earliest countries to hold an in-person summit meeting with President Trump. Understanding the long-term goals of President Trump would be helpful for people around the globe including Japanese especially when they analyze the Trump administration’s policy announcements. Taking a step back to look at the bigger picture is crucial, as Mr. Pottinger emphasized with his remarks about the three key concepts starting with the letter R. The topic of real estate was brought up, as President Trump has been vocal about Greenland and the Panama Canal. What are the regional priorities of President Trump and his administration? What priority does East Asia have, including the issue surrounding Taiwan?

Matt POTTINGER:
In his inaugural address President Trump mentioned Mexico and Panama. China was also mentioned in the context of the Panama Canal. This is a useful reminder that his focus is mostly on the Western Hemisphere, particularly the Americas. He strongly believes in the Monroe Doctrine of 1823. First and foremost, his focus is on reasserting American primacy in the Western Hemisphere, which is evident from his first tariffs being focused on Mexico and Canada as he tries to get control over the drug trade flowing into the United States. While his regional priority is the Western Hemisphere, the U.S. nevertheless continues to be involved in the Middle East, Ukraine, and East Asia.

In the Middle East, President Trump is reasserting the maximum pressure campaign that he pursued against Iran during his first term by trying to cut Iranian oil exports to bring Iran to the table to negotiate an end to its ambitions of developing a nuclear arsenal, and he is also active in Gaza now. In Europe, he has negotiators seeking to achieve a ceasefire between Russia and Ukraine, which is going to be a very difficult negotiation. A credible and visible security guarantee by Ukraine’s allies in Europe and the United States will be needed to enforce a ceasefire.

Again, what happens with Taiwan will be the single most important determinant of whether President Trump’s presidency is successful or not. He understands how important Taiwan is to U.S. national security and what a peaceful status quo means for prosperity and national security in the U.S. and worldwide. I am hopeful that he will maintain a firm position on Taiwan’s status, one that allows only for a peaceful, non-coercive resolution between the people of Taiwan and the authoritarian regime in Beijing.

UCHINO Masahiko:
Reindustrialization is a key concept for President Trump, which is also related to East Asia. In terms of economic policy, President Trump’s focus is on the revitalization of domestic industries, which is why his administration is inviting more foreign investment into the United States. At the same time, East Asia is very important for the economic security of the United States. Some experts say that this administration has a little interest in being involved in multilateral frameworks related to economic cooperation. How can greater engagement by the United States in East Asia in terms of economic cooperation be achieved? What specific areas of collaboration are particularly promising?

Matt POTTINGER:
Japan has a big opportunity to pick up where Prime Minister Abe and Prime Minister Suga left off during the first Trump administration. Japan can expand on the concept of a Free and Open Indo-Pacific that was included in the statement by Prime Minister Ishiba and President Trump. Some of the formats that were used in the first Trump administration included the quadrilateral meetings at the cabinet level between India, Japan, Australia, and the United States, called the Quad. Under President Biden, these meetings were elevated to the summit level. President Trump has a good relationship with India’s Prime Minister Modi and will develop good relationships with Australia’s Prime Minister Albanese and Prime Minister Ishiba.

Other formats are also possible, depending on the issues. The United States and Japan worked very closely to establish standards for protecting trusted data flows during the first Trump administration. This is even more important now as Beijing tightly controls Chinese data and does not let any data leave China, while actively collecting private data from every other country in the world.

Japan and the United States are a perfect starting point for addressing this issue, with potential expansion to include Europe and others. Areas where the U.S. and Japan can work with other countries to create new multilateral forums include critical minerals, pharmaceuticals, energy, and biosecurity. A much stronger degree of biosecurity cooperation between democratic allies and other partners that are willing to be good stewards of human security and health is needed. That includes setting up networks for detecting potential pandemics before they spread significantly, monitoring dangerous laboratory research, creating standards, and punishing countries that engage in dangerous lab research that puts millions or billions of lives at risk.

Other areas where Japan and the United States can pioneer extremely important new ground are AI, especially considering the convergence of artificial intelligence with national security issues, and electric vehicles (EVs). President Biden effectively banned Chinese electric vehicle technology from being imported into the United States. President Trump will probably continue this policy. However, it will not be sufficient for the United States to have a unique standard for self-driving cars and EVs. Instead, a much larger shared common standard is needed. Japan and the United States should work together to develop such a trusted standard for EVs and then bring in Europe, South Korea, and many others

UCHINO Masahiko:
Much attention is focused on the U.S.-China relationship, and there are many rumors and analyses. Some argue that China may want to make a deal as early as possible to avoid additional tariffs. Could such a deal be realistically achieved within a few months? If not, what would be a realistic timeline?

Matt POTTINGER:
It appears that President Trump is not seeking to have a more antagonistic relationship with Beijing at the outset of his presidency. Instead, he is seeking direct communication with Xi Jinping and his emissaries. Right now, he’s prioritizing the Western Hemisphere and global trade, which is why he has imposed tariffs on China. It is likely that tariffs on semiconductors and pharmaceuticals will follow, and the idea of reciprocal tariffs has also been mentioned. This priority on tariff policy is designed to drive investment into the United States to promote reindustrialization and bring a greater semblance of balance to trade between the U.S. and its partners. Another domestic goal of President Trump is increasing government efficiency by restructuring the U.S. government bureaucracy, attempting to reduce waste, eliminating some agencies entirely if legally possible.

Currently, these topics rank higher on his list of priorities than the relationship with China, so there may be a temporary détente approach for the next few months. But ultimately, this approach will most likely not be rewarded by Beijing due to the nature of Xi Jinping himself and the ambitions and goals he is pursuing. Based on his statements, it is clear that Xi is not seeking a balance of power with the United States. He has explicitly stated that China’s relations with Western countries are “irreconcilable” and that they would therefore require a very contentious set of confrontations, including “extremely sharp confrontations.” Xi Jinping is driving the direction of U.S.-China ties and much of the chaos occurring around the world, as highlighted in the statement by Prime Minister Ishiba and President Trump in their first sentence, where they referred to a violent and disorderly world. The “decisive enabler” of that violence and disorder is the Chinese Communist Party regime. China is a key driver of the war in Ukraine, a major supporter of Iran, and a threat to global security and prosperity with its ambitions to invade and annex Taiwan.

Even though President Trump is pursuing a sequenced foreign policy that prioritizes domestic issues for the time being, he will ultimately have to deal with the realities of a violent and disorderly world. If he wants to achieve a “golden era” as outlined in his statement with Prime Minister Ishiba and in his inaugural address, he will need to take difficult, concrete action to curb the Chinese government’s ambitions.

Q&A

Q:
How do you evaluate the power balance regarding the United States’ China policy, considering that there are hardliners such as Marco Rubio and Mike Waltz and those with a pro-China stance, such as Elon Musk?

Matt POTTINGER:
Every administration has hardliners and others who are more inclined to accommodate U.S. adversaries, and this administration will be no different. Ultimately, President Trump is the one who decides foreign policy. Something that is not widely known about President Trump is that he appreciates hearing a wide range of viewpoints when considering policy options, including on the question of China. The President will arrive at his own conclusion, taking into account all of the advice of those around him and considering the unfolding events around the globe. Many of these will be driven by Xi Jinping and his fellow axis members in Russia, Iran, Venezuela, and, of course, North Korea. Even if the President extends goodwill to these dictators, they will ultimately act violently and aggressively. President Trump will need to react and respond to that reality.

Q:
Secretary Pete Hegseth has announced that a return to Ukraine’s pre-2014 borders is unrealistic. Also, President Trump has made remarks about the U.S. taking over Palestinian territory for an undefined period of time. What can give Japan hope that these comments will not encourage China to do the same with Taiwan?

Matt POTTINGER:
With respect to Ukraine, there will not be a sustainable ceasefire unless there is a concrete security guarantee for Ukraine. This would require troops on the ground from like-minded countries outside of Ukraine to enforce a demilitarized zone, similar to the one between North and South Korea. China has every intention of annexing Taiwan, irrespective of U.S. foreign policy in the Western Hemisphere or the events in Ukraine. Xi Jinping is already determined to threaten Taiwan. Given this situation, deterrence must be demonstrated by Japan, the U.S., Taiwan itself, Australia and other countries. These like-minded countries need to demonstrate that they have the capability and resolve to defend Taiwan, as deterrence is the only thing that will dissuade Xi Jinping from making a move to annex Taiwan. He will refrain from going to war if military capability, economic leverage, and the resolve to use that leverage are collectively demonstrated.

Q:
How did you organize the dialogue between North Korea and the United States during the first Trump administration? What are key aspects necessary to create such dialogue between two powers?

Matt POTTINGER:
During his first term, President Trump pursued a reasonably effective North Korea policy. At the very beginning of the administration, he ordered a policy review by analyzing the history of the United States’ North Korea policy in terms of reasons for failure and options that should be considered. The United States had fallen into a self-defeating pattern of soft steps—giving North Korea access to the world economy, removing sanctions or refraining from applying them, and providing food and energy aid. There were a lot of carrots and very few sticks. This approach was not successful. At the same time, there was a pattern of middle-level diplomacy with North Korea. This combination of carrots for North Korea and low-power diplomacy enabled North Korea to make more progress toward expanding its nuclear arsenal.

Against this background, President Trump reversed this approach by using sticks instead of carrots through applying maximum pressure. He imposed the most significant tariff regime since the Korean War on North Korea. For example, some of the flow of oil into North Korea was cut off by pressuring China to restrict its oil supply. North Korean exports of labor to Russia and China, as well as seafood, coal, and other mineral exports, were cut off. On the other hand, President Trump left the door open for leader-to-leader dialogue since he understood that the only person capable of making meaningful decisions in the North Korean system was Kim Jong Un himself. In summary, it was a combined strategy of maximum pressure and talks. While this approach did not lead to Kim Jong-un giving up his nuclear arsenal, it did constrain North Korea’s access to the resources needed to expand the country’s military. Russia is now giving significant support to the North Korean regime in return for artillery shells, ballistic missiles, and young men to fight for Russia. It remains to be seen what kind of policy President Trump will employ this time, but it is likely to be heavily informed by the experience of his North Korea policy during his first term.

Q:
Do you expect President Trump to continue or strengthen the Quad framework?

Matt POTTINGER:
He was a supporter of the Quad in his first term. When the Quad has been slow to act, it has usually been because of Australia, but that has not been the case for many years and Australia is no longer a weak link. Taking that into account, it is possible that President Trump will support a leader-level meeting. One of Secretary of State Marco Rubio’s first meetings was to host a Quad meeting at the State Department with the ministers of Australia, Japan, and India, which shows that the new Trump administration supports the Quad.

Q:
What is the impact of President Trump’s tariff trade policy on the world trade system? Does it damage the rules-based trade system under the WTO?

Matt POTTINGER:
Sadly, the WTO was destroyed when the People’s Republic of China joined and failed to keep most of its promises. Organizations such as the WTO only work when they are dominated by countries that have respect for the rule of law, otherwise, they become unstable. President Trump’s policies could lead to a revisiting of global trade efforts by starting from a new foundation, in which the United States establishes reciprocal trade ties and seeks to build coalitions. After the establishment of reciprocal tariffs on other countries, there may be a period of disruption. Following this, these countries can try to negotiate a new order that lowers trade barriers reciprocally and allows for increased trade between nations governed by the rule of law, excluding countries that lack rule of law from the rulemaking and enforcement bodies.