Donald Trump's Incoherent China Policy

A Financial Times journalist, Robert Armstrong, coined on May 2 a phrase that has become popular to describe President Donald Trump's versatility on customs tariffs: TACO, an acronym for "Trump always chickens out," meaning "Trump always ends up backing down." Three months later, it's not impossible that the TACO theory also applies to the American head of state's policy towards China.

Oscillating between trade sanctions against Beijing and declarations of friendship for his counterpart Xi Jinping, Donald Trump continues to zigzag, delaying the deadlines he set himself and making decisions that contradict the firm line that had until now been the consensus in Washington.

Two examples from Monday, August 11, illustrate this confusion. In an unprecedented move, the President of the United States first reached an agreement with the CEO of Nvidia, the largest American microprocessor company and the world's largest market capitalization, under which the firm will be authorized to export H20 chips to China; in exchange, it will pay the U.S. Treasury 15% of the profits thus generated. The agreement also applies to another microprocessor company, Advanced Micro Devices.

Not only does this unprecedented procedure, whose constitutionality is questionable, establish a tax on chip exports to China and constitute direct intervention by the federal government in the activity of companies, but it also reflects a change of line from Washington on the sale of semiconductors to China.

This had been banned since April, when Donald Trump launched his global tariff offensive. To counter this offensive, Beijing had limited its exports of rare earth products, particularly magnets, which are essential for electronic components in several industries and of which China holds a virtual monopoly. The two major economic powers are thus exerting reciprocal pressure: China has the rare earth lever, and the United States is using the lever of artificial intelligence chips, for which Beijing does not yet have the technology.

By allowing Nvidia to export its H2O chips, Donald Trump is giving ground to China, raising fears among hardliners in Washington that he will later back down on exporting the most advanced chips, thereby endangering US national security.

The other concession announced Monday is the postponement of tariff negotiations with China for another 90 days. All of these maneuvers are obviously aimed at accommodating the Chinese president, with whom Donald Trump is keen to organize a summit meeting to conclude the trade deal he dreams of.

The problem is that the White House's China policy is completely illegible. America's partners, in Europe, Asia, and elsewhere, are justified in wondering whether the Trump administration has even decided on a strategy, or whether the Republican president is simply navigating by sight, according to his whims. of its mercantilist interests and CEOs who pass through the Oval Office. Instead of putting Xi Jinping in difficulty, this uncertainty plays into Beijing's hands, where it is betting on the long term, and sows confusion among European and Asian actors, both in trade and in the security field.