US election 2020: The campaign, coronavirus and China

There is an inverse relationship between economic recovery and American action against China

Welcome to the coronavirus campaign, now starring China.

President Donald Trump's best chance to win in November hinges on a V-shaped (V for victory) economic rebound and the American people having confidence in his leadership in responding to the pandemic.

Hedging in case the V remains elusive, Mr Trump already predicts the fourth quarter will see a healthy bounce (his "transition to greatness") and 2021 will witness a blockbuster economic recovery, both of course conveniently post-election.

When it comes to the market, he will follow the same modus operandi he has for his entire term: claim credit for ups and deny blame for dips.

At the same time, he and his campaign will engage in a scorched-earth attack blaming anyone he can for the condition in which the country finds itself: Joe Biden, Barack Obama, Nancy Pelosi, Chuck Schumer, the deep state, the media, Never Trumpers and ... China.

THE CHINA CONSENSUS

While voters purport to care about foreign policy, when it comes to presidential elections, the United States economy and idiosyncratic domestic issues such as gun rights and abortion invariably override global matters.

In this election, however, there is one issue that aligns both foreign and domestic policy concerns - China. Both Republicans and Democrats agree that action needs to be taken against China for its job-destroying unfair trade practices and its lack of immediate transparency during the outbreak of Covid-19.

Both Mr Biden and Mr Trump talk tough on China - and believe it. Both claim their respective policies will be more effective than the other's in protecting American interests. It's more than just politics and campaign rhetoric.

Mr Trump's anti-China credentials are a given. To show he can be just as tough, Mr Biden takes positions on China much different from the "accommodate and engage" bipartisan approach to Beijing from President Jimmy Carter through the beginning of the Obama administration.

Mr Biden can take no action against China unless he wins in November. As President, Mr Trump has no excuse for inaction.

TRUMP'S CHINA CHALLENGE

Balancing the intersection of rhetoric and policy will be a tough challenge for President Trump.

For the next six months, he is likely to take action against China in a way that is high profile - such as adding more Chinese companies to a blacklist that restricts their access to American technology - but stops short of escalating matters to the point of derailing the chances for a robust US economic recovery before Election Day. Mr Trump won't admit it, but he has good reason to pull his punches against China. Anything that dims the prospects for his hoped-for economic recovery puts at risk the thing most important to him - a second term in the Oval Office.

It is not surprising then that White House economic adviser Larry Kudlow said this week that while Mr Trump is "miffed" with Beijing, the US-China Phase One trade deal reached in January remains intact.

THE HONG KONG FLASHPOINT

China's National People's Congress (NPC) yesterday passed a resolution on enacting a national security law for Hong Kong, which will be added to the annex of the city's mini-Constitution, the Basic Law. Passage of the new law is a given but it will take months for its details to be crafted and the measure implemented. The move is hugely controversial and has revived street protests in Hong Kong, where many see it as China breaking its promise to allow the territory to maintain its autonomy as promised in the handover agreement with Britain.


The National People's Congress meeting in Beijing yesterday. The calculus of which actions President Donald Trump will opt for over China's move to enact a national security law for Hong Kong will be within the context of his re-election campaign. PHOTO: EPA-EFE

Since 1992, the US has given Hong Kong a special status in which it treats it separately from mainland China on matters of trade and economics, so long as China preserves Hong Kong's autonomy.

Last year, in response to the crackdown on protests, the US Congress passed the Hong Kong Human Rights and Democracy Act, which requires an annual review to determine whether changes to Hong Kong's political status justify changing its trade status. With the NPC's move on the new national security law, US Secretary of State Mike Pompeo says "Hong Kong does not continue to warrant" the same treatment under US law.

The response to this finding lies totally within the discretion of the US President. Mr Trump has a wide range of potential responses, including suspending Hong Kong's preferential tariff rates for exports to the US and targeted sanctions against Chinese officials and government entities involved in enforcing the new security law.

The calculus of which actions Mr Trump will opt for will be within the context of his re-election campaign. In fact, with this administration, most decisions seem to have been made within this prism. Mr Trump launched his 2020 campaign back in January 2017 - just after taking office.

If more serious sanctions are to be imposed, they can always wait until after the November election.

But plenty can happen between now and the election in November if Mr Trump makes it so.

A BAD ECONOMY MAKES RETALIATION MORE LIKELY

The ongoing trade war taught China it cannot rely on the US for its technology. The US learnt from the pandemic it should not rely on China for certain pharmaceuticals and other essential and strategic goods. While seemingly inevitable, this sort of decoupling takes time.

While the trajectory of the relationship is set for the long term, predicting the short term is far more elusive, especially in a presidential election year.

Mr Trump's best chance to win re-election is for the economy to rebound in the short term. So long as that hope exists, he will be reluctant to take action which would extinguish it.

China purchasing US goods and living up to its Phase One commitments, even if just in part, helps to improve the strength of any US economic recovery. And China knows this.

The more likely the US may recover economically before Election Day, the less likely any action from Mr Trump to lessen that from happening.

If, on the other hand, the US is headed into a deep recession by then and no action Mr Trump takes against China will make a difference in terms of economic recovery because it is a lost cause, then Mr Trump will take tougher economic measures against China and not just seriously ramp up the rhetoric.

Presuming China does not cross a line for which the US must retaliate, there is an inverse relationship between the economy and potential US actions against China.

A CLOUDY CRYSTAL BALL POST-ELECTION

In the "President for Life versus President Only Guaranteed One Term" power struggle, the short-term political equation for each side contains similar variables.

For Mr Trump, a strong economy increases the likelihood of him winning in November. China has its own version of domestic politics. President Xi Jinping, too, needs his economy to do well to offset any internal dissension. But he also needs to show strength in dealing with Hong Kong for his domestic political constituency as well.

Mr Xi's calculations could be that to offset his government's aggressive actions on Hong Kong, which anger the West, delivering on the Phase One trade deal helps Mr Trump with his own domestic politics which mitigates retaliation over Hong Kong.

Mr Xi choosing not to escalate the trade war means a stronger economic recovery for China and getting more of a free hand in terms of Hong Kong. At some point, President Xi could be willing to risk the trade deal blowing up because political stability (from his perspective) trumps all.

But probably not now.

The US and China may avoid entering into a new Cold War through November because it remains in both leaders' interests to do so. After the election, however, all bets are off.


 • Steven R. Okun served in the Clinton administration as deputy general counsel at the Department of Transportation. He is a senior adviser for global strategic consultancy McLarty Associates and a governor of the American Chamber of Commerce in Singapore.

A version of this article appeared in the print edition of The Straits Times on May 29, 2020, with the headline 'US election 2020: The campaign, coronavirus and China'. Print Edition | Subscribe