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Arms to Taiwan and Action Against a Chinese Bank: Is Trump’s US-China ‘Honeymoon’ Over?

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Trans-Pacific View

Arms to Taiwan and Action Against a Chinese Bank: Is Trump’s US-China ‘Honeymoon’ Over?

Is the Trump administration taking a warning shot across Xi Jinping’s bow or is this a broader shift in approach?

Arms to Taiwan and Action Against a Chinese Bank: Is Trump’s US-China ‘Honeymoon’ Over?
Credit: Twitter via @POTUS

Is U.S. President Donald J. Trump’s “honeymoon” period with China over?

Two developments on Thursday would certainly seem to suggest that, if not over, the United States is willing to step on Chinese toes more than it was in the aftermath of the April summit meeting between Trump and Chinese President Xi Jinping.

First, on Thursday morning, the U.S. Treasury Department announced that the Financial Crimes Enforcement Network was taking steps against the China-based Bank of Dandong for alleged activities facilitating financial activities for North Korean entities.

The Bank of Dandong, the Treasury Department alleged in a press release, facilitated millions in transactions for “companies involved in North Korea’s WMD and ballistic missile programs.” The complete proposal (PDF) goes into more detail, highlighting the extent of the Bank of Dandong’s alleged facilitation of North Korean financial activity directly linked to the country’s ballistic missile programs.

The Treasury Department’s measure is significant, but not in the way that many might think. This isn’t, for instance, the announcement of a broad-based secondary sanctions regime against China, but it is somewhat of a shot across Xi’s bow to signal that other Chinese financial institutions may be next. The development will irk the Chinese government and possibly send a sharp signal to other China-based financial institutions that do business with North Korea.

And there is pre-Trump precedent for this kind of action. In September 2016, for example, the United States Department of Justice pressed charges against Dandong Hongxiang Industrial Development Co. Ltd. for “conspiracy to violate the International Emergency Economic Powers Act (IEEPA) and to defraud the United States; violating IEEPA; and conspiracy to launder monetary instruments.”

China criticized the United States’ “long-arm jurisdiction” after the Dandong Hongxiang charges were announced.

The second measure on Thursday, announced in the afternoon, was the approval, by the U.S. State Department, of a major arms package to Taiwan. The package, expected to amount to over $1 billion, includes Early Warning Radar Surveillance Technical Support, AGM-154C Joint Stand-off Weapon, AGM-88 High-Speed Anti-Radiation Missiles, MK 48 6AT Heavy Weight Torpedoes, MK 46 to MK-54 Torpedo Upgrade, SM-2 Missile Components, and the AN/SLQ-32A Electronic Warfare Shipboard Suite Upgrade.

The package will need Congressional approval before entering negotiations. The announcement follows remarks by U.S. Secretary of State Rex Tillerson earlier this month highlighting that the United States would continue to abide by its commitments to Taiwan under the Taiwan Relations Act and stands to considerably increase tensions across the strait.

Intensifying the signal, the U.S. Senate Armed Services Committee approved a change in U.S. policy to permit U.S. Navy vessels to make regular port calls in Taiwan. Though that decision pipeline was separate from the executive-branch-led approval of the arms package, China will nevertheless likely perceive a moment of intensified U.S. backing for Taiwan, potentially leading to increased tensions.

Finally, on a somewhat related note, this also happened to be the week that the Trump administration released a joint statement with Indian Prime Minister Narendra Modi that included veiled reference to China’s Belt and Road Initiative, calling on “other nations in the region” to adhere to principles that bolster regional connectivity through “the transparent development of infrastructure and the use of responsible debt financing practices, while ensuring respect for sovereignty and territorial integrity.” (Though, as I wrote on Wednesday, the statement isn’t entirely suggestive of a U.S. about-face on the Belt and Road Initiative.)

In the end, these developments aren’t entirely surprising. Trump, personally, has been suggesting that China was working against a ticking clock on the North Korea issue. In late May, after North Korea tested a new type of Scud missile, Trump took to his personal Twitter account: “North Korea has shown great disrespect for their neighbor, China, by shooting off yet another ballistic missile…but China is trying hard!”

Later, in June, Trump tweeted that while “greatly” appreciated “the efforts of President Xi & China to help with North Korea, it has not worked out.”

“At least I know China tried!”

In hindsight, that final tweet may have been when the clock ran out for Xi.

The present doesn’t necessarily tell us about what the future holds in this instance, but what’s clear is that taken together, we see signs that the Trump administration is starting to rock the boat with China after a relatively calm first few months of engagement — all following Trump’s initial phone call with Xi as president back in February, when he finally endorsed the United States’ long-standing ‘One China’ policy.

These developments also suggest that the recently concluded Diplomatic and Security Dialogue between top U.S. and Chinese officials did not go particularly well. The visit resulted in few concrete deliverables, but the optics mostly suggested that U.S.-China ties remained stable and amicable. That appearance may not have reflected realities at the talks.

The Chinese side has yet to react to Thursday’s developments, but the reactions are likely to be quite negative — especially regarding news of the arms package to Taiwan. Most notably, the sale announced Thursday is the first package for Taiwan since independence-leaning President Tsai Ing-wen was inaugurated in May 2016. In just one year, cross-strait ties have taken a hit and China has systematically worked to deprive Taiwan of international space and its diplomatic partners.

The “Taiwan card” was briefly on the table for the Trump administration during the transition, when he spoke to Tsai, breaking with long-standing U.S. presidential transition. Now, the administration has played the Taiwan card — possibly to convince China that its unsatisfactory performance on the North Korea question will lead to further outcomes that are disappointing. (Perhaps this time in the South China Sea, too.)

For Taiwan, while news of a new arms package will be a welcome show of support from Washington amid its loss of diplomatic partners (most recently Panama), the possibility of turning into a bargaining chip between the two great powers remains a disturbing possibility.

Looking at this picture, there’s good reason to think that the Trump-Xi honeymoon — if it ever existed — is now truly over.