As Xi weakens, time for US and Taiwan to adjust

This article was first published in Taiwan’s Do Post.

My how quickly the establishment narrative can change. For most of the last 18 months, we have been on the receiving end of breathless declarations of US decline, China filling the international leadership vacuum, and Mao revivalist Xi Jinping consolidating power for life.

Now, just a few short weeks into a supposed US-China trade war, the US economy is growing at a stunning 4%, the US stock market remains near record highs, consumer confidence remains high, and talk in Washington is building towards a second round of tax reform to further stimulate the growing economy.

Early warnings of dire economic and political consequences in the US have faded, as China’s retaliation has yet to affect mainstream economic or political life in America.

The story in China is remarkably different. Capitals in Asia are buzzing with reports of economics strains in China and, suddenly, serious questions about the durability of Xi Jinping’s hold on power.

Odds are reports of Xi’s rapid decline may prove as impermanent as reports of his “leader for life” status. What is increasingly clear, however, is that if you were forced today to wager which leader’s tenure and policies would outlive the other’s, the smart bet would be on Donald Trump.

In the early stages of this contest, at least, the US appears to have the stronger hand and may for once be in a position to secure initial concessions from China. Make no mistake, however, this trade contest is likely to continue for years, not months, with many ups and downs. President Trump’s basic policies on trade and China reflect a deep personal passion on his part, and they are fundamental to his electoral college strategy for re-election in 2020.

Given these changes to dominant assumptions, it is critical that leaders in the US and Taiwan adjust course in two major policy areas: economics and defense.

As economic and political risk in China increases, it is imperative that investment, manufacturing, and trade patterns adjust. Neither Taiwan nor US manufacturers can afford continued over-reliance on platforms in China. Taiwan should seek to “onshore” more manufacturing to the US, even if gradually, and US leaders should prioritize facilitation of such moves. Most importantly, Taiwan leaders should propose a bold, high-standards bilateral trade agreement with the US. It would be strategically beneficial to both economies and both nation’s leverage with China.

Just as important, if reports of Xi’s declining political power are true, there is increased risk that he could use attacks on Taiwan (political, economic, or otherwise) to fan nationalism and distract away from other domestic discontent. It is vital that the US and like-minded allies stand in solidarity with the Taiwanese people, strengthen their ability to defend themselves, and blunt Beijing’s efforts to isolate and coerce their leaders.

Now is the time for true leaders to speak up, be bold, and adjust to the risks of a faltering China.