Cross-Strait Relations

In her year-end press conference on December 31, 2016, Taiwan President Tsai Ing-wen focused on her administration’s domestic policy agenda but also noted Beijing’s increasing pressure on Taiwan since she took office on May 20. Beijing has cut off high-level communications between the two sides (while maintaining ties with the former KMT party), and applied economic sanctions, including measures to reduce Chinese tourism and certain agricultural imports from Taiwan. Beijing has continued to insist Tsai and the Democratic Progressive Party accept the “One China” principle despite public opposition in Taiwan.

Since the widely publicized phone call between President-elect Trump and Tsai in early December, Taiwan’s Defense Minister has asserted that Beijing has stepped up military pressure by increasing the frequency of PLA bomber exercises around Taiwan.  In late December, São Tomé and Príncipe, one of the remaining 22 countries maintaining diplomatic relations with the Republic of China (Taiwan), announced its decision to sever ties with Taiwan and resume ties with China in a ceremony held in Beijing.  In advance of Tsai’s planned visit to four of Taiwan’s Central American diplomatic allies in January, the Chinese Foreign Ministry urged U.S. officials not to allow her to transit through the United States in order “not to give any false signals to Taiwan independence forces, and through concrete actions safeguard overall U.S. China relations and peace and stability in the Taiwan Strait.”  In response to the media, the U.S. State Department spokesman noted such transits were based on “longstanding U.S. practice, consistent with the unofficial nature of (U.S.) relations with Taiwan.”  Tsai subsequently stopped over in Houston and met with Senator Ted Cruz and Governor Abbott on January 7 on the way to Guatemala and is scheduled to stop in San Francisco on the way back to Taiwan.

U.S.-China Relations

Shortly after the U.S. election and in anticipation of new U.S. trade enforcement actions under the Trump administration, Chinese media (Global Times) warned that “China will take a tit-for-tat approach then. A batch of Boeing orders will be replaced by Airbus.  U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted.  China can also limit the number of Chinese students studying in the U.S.  Trump as a shrewd businessman will not be so naïve.  None of the previous presidents were bold enough to launch an all-out trade war against China.”  Following this, in mid-December, a Chinese ship seized an unmanned underwater drone deployed by and in the presence of a U.S. Navy ship in international waters.  The Pentagon told journalists there was “no precedent for this in recent memory,” and the United States issued a formal diplomatic protest to demand the drone’s return. Trump himself got involved tweeting: “China steals United States Navy research drone in international waters — rips it out of water and takes it to China in unprecedented act,” and when China offered to return the drone, “we should tell China that we don’t want the drone they stole back.- let them keep it!”  Although China eventually returned the drone a few days later and blamed the United States for hyping up the incident, this action clearly has escalated tensions.

Meanwhile, the White House announced that President Obama signed the 2017 National Defense Authorization Bill into law on December 23, which includes a section lifting a previous ban and allowing civil officials at the level of Assistant Secretary of Defense or above and general officers on active duty in the Department of Defense to conduct a program of senior military exchanges in Taiwan. In addition, the U.S. Senate and House issued a Joint Explanatory Statement regarding the Act expressing strong support for U.S.-Taiwan security ties.

Tensions expected to build up further

Given the developments summarized above, it would be reasonable to expect increased tensions in cross-Strait and U.S.-China relations. For Beijing, there is purportedly no national goal more important than that of returning Taiwan to the mainland’s control.  This goal ultimately requires changing the status quo which has served as the basis for Taiwan’s continued political existence since 1949.  Under the 1979 Taiwan Relations Act (TRA), the United States committed to assist Taiwan in maintaining “a sufficient self-defense capability” in order to sustain this status quo after switching diplomatic ties from Taiwan to Beijing.  Hence,  Beijing’s efforts to change the status quo, by other than peaceful means,  would be challenged not only in Taiwan but in the United States as well.

Additionally, it increasingly appears that the incoming Trump administration may in fact challenge China, initially on trade and investment issues. If so, we should expect significantly stronger responses against China with respect, for example, to its currency controls, export subsidies, industrial policies and continued restrictions and actions against foreign companies’ operations in China.  This may eventually also lead on the U.S. side to greater scrutiny specifically of growing Chinese investments in the United States not only in terms of national security considerations but also in terms of economic security and reciprocity.  While an “all-out trade war” still seems unlikely, retaliatory measures taken by both sides will probably have a significant impact on bilateral trade and investment, especially if China does retaliate in a “tit-for-tat” manner as is expected.

In sum, U.S.-China bilateral trade issues, compounded by differences over Taiwan, seem likely to intensify early in the Trump Administration. This could easily spill over to other issues in the political and security arena, especially given China’s increasingly assertive policies in the East and South China Seas.  Thus, while the Trump Administration’s Asia policy remains unclear at this time, the potential for increased tensions in U.S.-China relations is real and growing.