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China-US relations

North Korea missile test highlights limits of US President Donald Trump’s China strategy

Trump will find his trade or economic options to contain the North limited by the possibility of any retaliatory Chinese action if Beijing perceives any potential harm to its interests

PUBLISHED : Thursday, 06 July, 2017, 12:39pm
UPDATED : Thursday, 06 July, 2017, 1:44pm

US President Donald Trump is grappling with the limits of his strategy to rely on China to get North Korea to limit its nuclear and missile programmes following the reclusive state’s July 4 test of an intercontinental ballistic missile.

The US president must now decide whether the test, coupled with the death last month of an American college student who had been imprisoned in North Korea, means giving up on collaboration and more directly confronting Beijing.

Those advocating a hard line within the administration are emboldened by the recent North Korean actions, and the White House is weighing a series of gestures that could antagonise Chinese President Xi Jinping’s government.

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But Trump’s options are limited by practical and economic realities. The president must calibrate a response that would prompt Chinese pressure on North Korean leader Kim Jong-un without causing difficult repercussions for US interests.

Trump must also convince Beijing he is willing to follow through on his threats, particularly after Chinese authorities appeared to shrug off promises to solve the North Korean issue on his own, if necessary.

Trump has expressed increasing exasperation with China on Twitter. “So much for China working with us – but we had to give it a try!” he said in a tweet on Wednesday.

His United Nations ambassador, Nikki Haley, threatened on Wednesday to cut off US trade with any nation that does business with North Korea. The US will present a new resolution to punish North Korea for its missile test in coming days, Haley said during an emergency session of the UN Security Council.

“We will look at any country that chooses to do business with this outlaw regime,” Haley said.

Christopher Hill, who led US talks with North Korea under former president George W. Bush, said the US can get China to do more, “but it has to be in the context of working with China, not outsourcing to China.”

“We need to put our heads together with the Chinese,” Hill said in a phone interview. “Assuming we can’t get a responsible negotiation with the North Koreans, figure out what we can do together to slow up this movement toward nuclear weapons.”

So far, Trump’s approach is cautious escalation. The administration plans to increase pressure on China by letting the country know it can be squeezed on economic issues, including currency and trade, according to a State Department official who requested anonymity when discussing internal deliberations. The US is also encouraging other allies to publicly declare how they are working to cut off North Korea, seeking to build momentum on the world stage.

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“I think the Chinese are afraid that if they really put the squeeze on Kim Jong-un he would do something desperate, he could cause a conflict, he could cause a war,” said Gary Samore, a former White House coordinator for arms control and weapons of mass destruction under former president Barack Obama.

“Or if North Korea did collapse you’d have chaos, North Korea being absorbed by the south, refugees fleeing across the border,” according to Samore, now the executive director for research at Harvard University’s Belfer Centre for Science and International Affairs.

If Trump does want to ratchet up direct pressure on China, he may move to increase sanctions on Chinese banks. In late June, the Treasury Department cut off the Bank of Dandong – which operates 101 outlets in northeastern China and reported 78.3 billion yuan (US$11.6 billion) in assets at the end of March – from the international financial system because of its dealings with North Korea.

Senator Chuck Grassley, the Republican chairman of the Senate Judiciary Committee, said on Wednesday that China should take note of the message.

“That ought to send a clear signal that we can do that with other Chinese banks and that’s going to hurt not only the economy of North Korea, but also hurt the economy of China, and maybe get China to take the actions that are necessary to get them to step in,” Grassley said during a radio appearance in Iowa.

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But China is likely to respond forcefully to any action that seriously affects its banking sector. Chinese state media said Xi warned Trump that “negative factors” are hurting US-China relations after the move to sanction the Bank of Dandong.

Trump could also take the largely symbolic step of labelling China a currency manipulator. In April, he violated a campaign promised by opting against the move, saying explicitly his reversal was meant to encourage China’s cooperation on North Korea.

“Why would I call China a currency manipulator when they are working with us on the North Korean problem? We’ll see what happens!” Trump said in an April 16 tweet, one day after the Treasury Department released its foreign-currency report.

Treasury Secretary Steven Mnuchin is expected to host his Chinese counterpart for an annual economic meeting in Washington later this summer. Mnuchin has said he plans to hammer out trade, investment and other economic issues between the nations.

Trump could resort to another campaign promise – protecting the US steel industry – to needle China. He has ordered a review of the effect of steel imports on the US economy, and recently has issued repeated public criticisms of the practice of steel dumping.

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Those comments appear explicitly aimed at China, which accounts for more than a quarter of the US steel market. They may signal Trump’s willingness to impose new tariffs on Chinese steel.

That move carries its own problems: it would likely drive up steel prices for US manufacturers and builders while also risking retaliatory tariffs on US goods. Gary Cohn, the president’s top economic adviser, said Trump plans to raise the issue at this week’s G20 summit in Germany, where Xi and Trump plan to hold a one-on-one meeting.

The US has increased its military presence in the Pacific in response to North Korean provocations, and increased activity there could also antagonise the Chinese.

The US and South Korean militaries held a drill after Tuesday’s ICBM test, and China has repeatedly expressed anger over the US installation of a missile defence shield in South Korea. China was also piqued after the USS Stethem, a guided-missile destroyer, sailed within 12 nautical miles of a disputed island in the South China Sea. China has claimed sovereignty over the island, which was previously controlled by Vietnam, since 1974.

On Tuesday, China and Russia proposed that North Korea declare a moratorium on nuclear and missile tests if the US and South Korea halt large-scale military exercises.

Hill said that such a deal would “fall unwittingly into the North Korean desire that somehow they can decouple the US from South Korea and I think we ought to stand against that.”

“We should not be acceding to a Russian or Chinese idea that does the North Korean bidding for them,” he said.