Has Trump Got his Priorities Right With a US-China Trade Deal?

US National Security Adviser Robert O’Brien recently expressed his confidence that America and China can end their 16-month trade war by the end of the year, but he said the situation in Hong Kong could be an obstacle to signing a trade agreement. The escalating violence and protests in the former British colony begs the question as to whether US President Donald Trump has got his priorities right in protecting the island from Chinese oppression whilst many factories in the rust-belt states he needs to win in 2020 to continue to be affected by his trade policies.

The Chinese Government has responded to the new Hong Kong Human Rights and Democratic Act (HKHRDA) by suspending US warship visits and they have sanctioned several American non-government organisations. This act requires the US President to annually review the city’s favourable trade status and threatens to revoke it if the semi-autonomous territory’s liberties are curtailed. Michael Raska, a security researcher at Singapore’s Nanyang Technological University, told the AFP news agency it sends a signal that US-China tensions will continue to deepen.

Instead of protecting Hong Kong, the HKHRDA could hurt the Chinese territory’s economic prospects and businesses that operate there. Because of its special status, Hong Kong is exempt from certain tariffs that the US has applied to China. But the revocation has to come from Trump through an executive order, or Congress, via the United States-Hong Kong Policy Act of 1992, which clarifies Washington’s special treatment of the city.

Analysts in Washington said the law is unlikely to go so far as to revoke the city’s special status, given the economic stake the US has in Hong Kong. Over 85,000 American citizens live there, and nearly 1,400 American businesses operate there. The US trade surplus in Hong Kong was worth $32.6 billion in 2017. Washington’s economic stakes in the former British colony are significant.

As the Brookings Institute argues, America has a powerful incentive to support attempts to preserve Hong Kong’s high degree of autonomy. The use of violence by either side thwarts American interests. Beijing is under pressure to allow Hong Kong’s citizens to exercise their political freedoms peacefully, which is why tighter political controls will be counter-productive if the Chinese Government is serious about quelling these protests.

The US is right to defend American values against China. No matter what Washington does, the Chinese Government will accuse them of interference either way. But considering America protects the right to free speech and peaceful political protest, the world’s largest democracy has a duty to defend countries where these rights are being prohibited.

Equally, this situation needs to be resolved quickly before the trade war continues to damage America’s manufacturing base. According to the ISM’s index of US manufacturing, industrial activity in many of the rust-belt states Trump needs to win in 2020 has stagnated for the past three months. In Michigan, where the President prevailed over Hillary Clinton by 10,704 votes, manufacturing jobs dropped by 4.2 per cent in October. The Financial Times suggests the escalating US-China trade war is one of the key reasons for this.

Furthermore, employment levels in primary metals production made solid gains last year, but have fallen this year.

US Steel itself made a $700 million investment in an Arkansas steel plant that is more technologically advanced than its existing facilities, but analysts say the sector’s difficulties are apparent.

It is Trump’s responsibility to resolve the situation in Hong Kong quickly. The US must protect territories whose freedoms are being prohibited. A quick resolution to this crisis will result in Beijing and Washington being able to conclude a trade deal. But the President should hope this situation does not linger into 2020 because if it does, it could hurt his support in many of the key states he needs to win again next year.