Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Trump Got an Edge over China with a Single Phone Call

Politics / China Dec 13, 2016 - 02:51 PM GMT

By: John_Mauldin

Politics

BY GEORGE FRIEDMAN : Donald Trump spoke on the telephone with the president of Taiwan, causing deep upset. It was counter to an understanding in place since Richard Nixon opened the door with China in 1972.

This understanding included an American endorsement of the one-China policy. This policy held that Taiwan is part of China, but would continue to behave as if it weren’t. The US agreed not to have diplomatic relations with Taiwan and pretend it isn’t a close ally.


The agreement was a fairly meaningless concession. It allowed the Chinese to domestically claim they had forced the US to capitulate on an important issue. By speaking with the Taiwanese president, Trump undermined that agreement.

The Chinese responded by saying President Trump will be judged differently than President-elect Trump. They remained calm.

The Context of the Taiwan Agreement

The context of this agreement should be recalled. When Nixon went to China, the Vietnam War was still being fought. It was unclear if the US could resist Soviet military action in Europe. The Chinese fought a major battle in 1969 with the Russians along the Siberian-Chinese border. Sino-Soviet relations plummeted in the 1960s. China was worried about a Soviet attack, including a nuclear strike.

The Soviets seemed to be in a position to confront either China or the US in Europe, but not both simultaneously. The US needed to tie the Soviets down by posing a counterthreat in Europe and Asia, simultaneously. Soviet transport didn’t allow for rapid force movement.

Coercing the Soviets to divide those forces between two fronts notably reduced their ability to mass strategically overwhelming power. Coordination between the US and China in the 1970s led to China permitting US intelligence listening posts to intercept Soviet trafficking.

This was the context in which the agreement on Taiwan was made. Two powers faced serious strategic problems. Geopolitics trumped ideology, as it often does. The two powers reached an understanding that achieved vital strategic goals for both.

China’s Domestic Cover

The Chinese asked for something incredibly trivial. They asked the US to acknowledge there is only one China. China agreed not to invade Taiwan. Given the stakes, the US readily agreed. Taiwan was independent of China and a close US ally. China was too weak to invade Taiwan, but China needed domestic political cover. Its ability to claim an American capitulation on Taiwan was important. The US didn’t want to expose the Chinese politically. Nixon would capitulate.

He knew there would be posturing in Congress, but he could weather it. The US closed its embassy in Taiwan and reopened it as the American Institute in Taiwan, manned by US diplomats. Travel, trade, investment, and arms sales continued as if nothing had happened.

Much time has passed since that deal, and a few things have happened. The Soviet Union collapsed. The Vietnam War ended. Vietnam is the US’ partner and is hostile to China. China has surged economically as the last generation’s low-wage, high-growth economy.

The foundations of the agreement on Taiwan have evaporated, but the reality is the same. Taiwan is an independent country despite what anyone—including Taiwan—says. And it is a close US ally.

Trump’s Bargaining Chip

Chinese exports have undercut American industry. The movement of the US industrial sector to China, among other countries, created an economic and social crisis in the US. Trump won the election because of that crisis. One of his major commitments was to restructure the US-China relationship.

Hence the phone call. By making the call, Trump signaled to China he could act unilaterally if China isn’t prepared to renegotiate the relationship. Everything is on the table. Trump selected a high-visibility, low-content issue—Taiwan—to demonstrate his indifference to prior understandings.

Critics say Trump attacked the foundations of US-Chinese relations. It’s true in a way, but Trump pledged to change the foundations of that relationship.

Trump’s move could alter the US-Chinese relationship. That relationship was established during the Nixon administration.

It is important to note, the common tendency to assume observers are smarter than political leaders whose behavior they are analyzing. This attitude prevents one from realizing that Trump is clear on what he is doing and what it means.

While the rest of society enjoys belittling political leaders as sport, becoming president of the United States is an enormous struggle the brightest professors can’t navigate. There is no reason to assume Trump didn't know what he was doing.

China’s ability to counter is limited. It has money in American banks, and if China wants to redeposit that money in European banks, it’s their risk. Their military capabilities remain limited. Their navy remains no match for the US Navy, and they can’t afford a war whose outcome they can’t predict. The US is 25 percent of the world’s economy.

China can’t walk away from the US without enormous pain. The US can’t afford to leave the relationship unchanged. And China may not be able to stonewall Trump as they did other presidents.

Taiwan is no more important in 2016 than it was in 1972. Accepting the one-China policy never shifted the fundamental reality of Taiwan-US relations. But it gave cover for the Chinese in a strategic context that has long disappeared.

This puts China in a difficult situation. China desperately needs access to American markets to avoid slipping deeper into economic stagnation. President Xi Jinping needs to appear strong and intimidating in the world to bolster his position in China.

Trump signaled to China that he can take away what Nixon gave them. By doing what Nixon did—using volatility and unpredictability to intimidate—Trump set the stage for a negotiation China can’t refuse. Previous presidents were prepared to posture but did nothing substantial about China.

With a single phone call, Trump did what he seems to do best—baffle and unnerve a negotiating partner. He has shifted the issue from what China is willing to do, to how far Trump is prepared to go.

Watch George Friedman's Ground-breaking Documentary, Crisis & Chaos: Are We Moving Toward World War III?

Russian adventurism. An ailing EU. Devastation in the Middle East. These are just three symptoms of a systemic instability engulfing a region that’s home to 5 billion of the planet’s 7 billion people.

In this provocative documentary from Mauldin Economics and Geopolitical Futures, George Friedman uncovers the crises convulsing Europe, the Middle East, and Asia… and reveals the geopolitical chess moves that could trigger global conflict. Register to watch the documentary now.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules