Trading in Security

THE TRAJECTORY OF the Trump administration’s relationship with China is slowly emerging through the din of the trade war. During Trump’s first term, tariffs were levied on Chinese imports to address the issue of equitable market access for American businesses. The US and China signed a trade deal in 2020 under which Beijing agreed to buy more. Yet, Washington’s trade deficit in goods with Beijing stood at $295.4 billion in 2024, an increase of 5.8 per cent compared to the previous year. Trump’s ‘America First’ trade policy unveiled in January makes it clear that his administration’s priority will be to review whether or not China adhered to its commitments under the agreement signed in January 2020. Additionally, Trump’s policy manifesto aims to investigate Beijing’s practices related to transfer of technology, violation of intellectual property, routing exports through third countries, discriminatory trade practices. The document seeks to undertake an economic and security review of the industrial and manufacturing base to ascertain if Washington needs to adjust imports that imperil national security. There is also an impetus to examine the export-control framework that restricts sale of technology to “strategic adversaries”.

Since assuming office, Trump has slapped levies on Chinese imports twice, taking the total tariffs to 20 per cent. He has indicated imposing duties on vehicles, semiconductors, and pharmaceutical imports. Taking cue from the prevailing political climate, US lawmakers have urged the Trump administration to probe questionable trade practices that seek to evade tariffs and raise vigilance to curb trans-shipment. In the US, the de minimis rule lets in low-value packages duty-free. Exploiting this loophole, some e-tailers have mailed merchandise costing less than $800 directly to US consumers from China. Draft legislation has been now introduced to check trade exemption.

Trump’s target is not just China’s exports but also the logistics setup. Pursuing an inquiry into the maritime and shipbuilding sectors, the US trade representative has moved a proposal to charge a fee of $1.5 million for a single port call for ships built in China, and $5,00,000 for an operator even if the entity has one Chinese vessel in its fleet. China’s Cosco is said to be the world’s fourth-largest container line, and the proposed levy will target the maritime supply chain.

After trade, capital too has received attention in the ‘America First’ investment policy announced in February, which bases the foundation of national security as economic security. China’s ‘military-civil fusion’ that seeks to co-opt its private sector and research facilities to augment its industrial base and support intelligence-gathering finds mention in it. Trump perceives American investors who put money into Chinese companies as unwittingly pushing its military modernisation. He seeks to regulate the flow of capital, technical knowledge, and technology to China, and restrict frontmen connected to China from acquiring agricultural land, critical American businesses and assets. The Committee on Foreign Investment in the United States—which examines investment into America from foreign entities from a national-security perspective—was mandated by Trump to limit Chinese investments in critical infrastructure, healthcare, agriculture, energy, raw materials, and technology through an order last month. Plans are afoot to expand curbs on American outbound investment to China in fields like aerospace, quantum, biotechnology, semiconductors, and artificial intelligence (AI).

The Trump administration hit the ground running on countering China’s aggressive behaviour soon after taking office. Hours after taking oath as US Secretary of State, Marco Rubio hosted Indian External Affairs Minister S Jaishankar and his counterparts from Australia, and Japan, which collectively constitute the Quadrilateral Security Dialogue (Quad), and also met the ambassadors of these nations bilaterally. The Quad’s joint statement asserted opposing unilateral actions that sought to change the status quo by coercion or force, and upholding and defending the rule of law, democratic values, sovereignty and territorial integrity in a free and open Indo-Pacific. This marks a crucial departure from Washington’s diplomatic protocol, since a new administration usually reaches out to members of the NATO alliance, or neighbours like Mexico and Canada. The salience of the Quad can also be gauged from a Trump directive titled ‘Unleashing American Energy’ that instructs the State Department under Rubio to enhance mining and processing of minerals within the US through the Quad. China created an export-control mechanism that restricts trade of critical minerals used in electronics supply chains. There is a new twist in the Washington-Taipei dynamics following the State Department stating that it will support Taiwan’s participation in international organisations, and Rubio dropping the phrasing from the State Department website that “the U.S. shall not support Taiwan’s independence”. Beijing had been urging Washington to state unequivocally that it was opposed to Taiwan seeking independence instead of the State Department’s traditional stance that it “did not support” independence. The vexed issue figured during the talks between Chinese President Xi Jinping and then-President Joe Biden during the San Francisco summit in 2023. When Rubio met his Japanese and South Korean counterparts during the Munich Security Conference in February, he reinforced this position on Taipei by stating that peace across the Taiwan Strait is indispensable to the international community’s security. Xi has resorted to regular military coercion against Taipei but Rubio’s posturing has put Beijing on notice.

As the world’s top economies and military powers slug it out, there are both opportunities and challenges for India. Rubio has been a strident advocate of building ties with India and sees New Delhi as vital to Washington’s strategy to counter Beijing’s belligerence in the Indo-Pacific. He moved the US-India Defense Cooperation Act in the Senate in July 2024 which sought to raise India’s strategic status and give it access to sophisticated defence technology on a par with Washington’s traditional allies like Japan and Israel. Second, while the Quad grouping under Biden saw cooperation on issues like climate change and health, the security component seems to be stronger under Trump 2.0. Third, there is no clarity as to what Trump’s endgame is behind the escalation on trade and technology with China. One theory is that Trump seeks to use the brinkmanship as leverage against Xi. Beijing’s initial rejoinder to Trump’s tariffs was that it was prepared for a trade war or “any other type of war”. Yet, during his presser on March 7, China’s Foreign Minister Wang Yi spoke of cooperation between the US and China given “common interests”, and media reports speculate about a “birthday summit” in June between Trump and Xi that could pave the way for negotiations to take the heat off Beijing. New Delhi will be watching this ‘Art of the Deal’.

Chinese President Xi JinpingDonald TrumpgeopoliticsIndia-US relationstrade and tariffUS-China