Structural factors have been driving US-Chinese competition and rivalry in recent years. In a nutshell, the United States wants to maintain the status quo, and an ascendant China wants to change it. The first Trump administration called an end to the war on terror that had dominated U.S. security policy since 2001 and acknowledged the return of great power competition. The Biden administration labelled China a peer competitor. Judging by the recently announced personnel appointments as well as by the generally hawkishness in Washington towards Beijing, US-China competition will intensify under a second Trump administration.
While it is difficult to predict what precisely the president-elect will do regarding trade policy towards China, personnel choices point towards an intensification of geo-strategic and geo-economic competition. Both Florida Senator Marco Rubio and Florida Congressman Mike Waltz, who have been nominated to be the next secretary of state and national security advisor, are certified China hawks. Moreover, it is difficult to find anybody in Congress, and this includes both Democrats and Republicans, who is a China dove, even though Republicans are on balance more hawkish than Democrats.
All this points an intensification of US-Chinese rivalry, not to a grand bargain, and certainly not a lasting one. It is worth remembering that reforms to the US export control and inward investment regimes took place under the first Trump administration, and the Biden administration further tightened controls. Biden did also not reverse the Trump tariffs during his mandate. What exactly U.S. trade policy will look like, and whether the Trump administration will impose 60% tariffs on imports from China on a permanent basis, is somewhat uncertain. But national-security focused foreign economic policies focused on China are almost certain to become more hawkish in the context of US-China rivalry.
Meanwhile, Beijing has been trying to reduce its vulnerability to unfriendly US geo-economic policies by, among other things, fostering domestic innovation to make itself less dependent on foreign technology and foreign export controls, by internationalizing the renminbi in the hope of blunting potential currency sanctions and by rebalancing its economy and switching towards so-called dual circulation to reduce the negative impact of foreign import restrictions. The expansion of China’s blue water navy and the Belt and Road Initiative similarly aim to protect sea lines of communication and secure China’s physical access to international markets.
A further tightening of US export controls and investment restrictions targeting China is likely. Policies will primarily target dual-use goods and technologies. What does this mean for Latin America? Admittedly, the primary and more immediate concern for the region is to what extent the Trump administration is serious about imposing across-the-board tariffs. But the focus on US-China competition is likely to lead to increasing pressure on Latin American countries to align some of their policies with Washington’s preferences. Washington is unlikely to look kindly at extensive Chinese investment in critical infrastructure in the region. Nor is it likely to sit by idly as (selected) Chinese companies seek to circumvent US import restrictions by investing in third countries, particularly those with which it has free-trade agreements, or by routing trade through third-countries to gain access to US markets.
This is why Latin America would be well-advised to come up with a forward-looking policy to deal with intensifying US-Chinese geopolitical rivalry and geo-economic competition, otherwise it risks ending up between a rock and a hard place.