‘Trump is the catalyst’ – former ambassadors Diego Guelar and Sabino Vaca Narvaja on US-China relations

Shortly before Donald Trump’s inauguration for a second term as President of the United States, the last two ambassadors in China reflected in an extended conversation about the risks faced by the Asian giant from a leader whose first term saw the start of a trade war with China (continued by his successor Joe Biden) and who will return reloaded in his second term. 

Attacks and reprisals on the chessboard of the two world powers, one of which consolidated its hegemony after World War II in the 20th century and the other emerging to dispute that position in the 21st century. 

While our interviewees disagree on some issues, both agree as to the role of Elon Musk, Trump’s key backer as the US president takes control of White House.

 

From the electoral campaign through to his Cabinet appointments, Trump has made it clear that he believes in an inevitable confrontation with China over commercial and technologícal issues. In his first term, the Chinese government adopted mainly symbolic compensatory measures after United States tariffs and commercial restrictions. The question is whether China is inclined to intensify its response, applying aggressive and specífic countermeasures against US firms.

DIEGO GUELAR: As the 45th and now 47th US president, Trump, has marked out a new stage in the relationship between China and the United States, defining the former as the enemy. Before Trump, there was a climate of cooperation, not confrontation in the early 21st century until the end of the [former US president Barack] Obama terms. The principle of confrontation was clearly established as from the first Trump presidency and continued under President Biden without any political shift in that definition. 

We are now starting a new stage and my feeling is that all those pre-inaugural announcements had a single target, which was Xi Jinping and China. When he speaks of annexing Canada, buying or occupying Greenland, recovering the Panama Canal, applying 60 percent tariffs especially to China, punishing the European Union by obliging five percent of the budgets of EU countries to be spent on defence, etc., I believe that he is telling [Chinese] President Xi Jinping: ‘Dear Xi, you’re an autocrat and different from our system in philosophical terms but in practice you have a spectacular concentration of power. In your case, dear Xi, you are not limited by the separation of powers, an independent judicial branch and a free press. So you’re a machine occupying positions at an extraordinary speed as the main partner of 140 of the 190 countries in the world. If I permit that to happen, you win the war. So what’s my answer? There is an emperor in the East so I’m the emperor of the West. I’m going to behave as an autocrat with no limits on my power because if I don’t, there is no chance of winning this war if I do not concentrate great power. I have the basics for that with majorities in both Houses of Congress and a majority of tame justices in the Supreme Court and now I will be imposing these ground rules on all these allies and others too. We will thus be balanced and we will play one-to-one at the negotiating-table in equal conditions.’ I see that as the scenario, as from January 20.

SABINO VACA NARVAJA: I share with Diego the point that Trump was one of the people most radicalising this definition of China as a strategic opponent. There were some prior indicators but it is true that Trump crystallised it with all his might and Biden has continued it, of course. So much so that when Elon Musk  – who, by the way, manufactures his Tesla electric cars in Shanghai, where he has one of his factories and sells a whole bunch of products in China) – asked for protective tariffs because BYD, a Chinese electric vehicle company which now heads the segment, was beginning to compete successfully, the Biden administration granted them 100 percent. So I agree with Diego that there is a continuity in choosing China as a strategic opponent. 

More than the contest over commercial issues, I believe that deep down the competition is technological. In the first Trump presidency this was concentrated in telecommunications and 5G, thus starting a change in US philosophy with regard to economic sanctions and technological blockades as this confrontation began. The difference with this stage is that while the Biden administration continued to single out China as a strategic opponent, the difference on the Chinese side is that Xi Jinping, now completing his third term, has been the president all this time for both Trump presidencies. 

There are thus, I think, better elements for designing US policy within this scheme of singling him out as a strategic opponent. And here I’d like to go into a bit more depth because in Trump’s first onslaught when he was imposing sanctions and technological blockades, this also had an impact on the US philosophy of free trade, in my view. Remember that Trump also began with the issues of the wall against Mexico and the immigrant influx, taking a very contemptuous view in highly aggressive fashion of somebody who to this day continues being a decisive partner in the trade relationship between the United States and China. 

That has a double effect. One, of course, is that China begins to develop dynamics to respond to those aggressions but that creates in the Chinese population a kind of nationalism which did not exist before. Until that moment, the Chinese population in general and the Chinese élites took a fairly benevolent view of the United States, holding it up as a model to follow in terms of development. Indeed part of the strategy for developing western China borrowed from the US strategy for regional development. So such models began to be placed in doubt due to this aggression with a certain nationalism appearing. 

One indicator of this was that at that time the iPhone was one of the brands of mobile telephone most widely sold in China but it rapidly shifted to Huawei. Trump’s restrictions of 5G technology in communications in order to stigmatise Huawei thus had the opposite effect in China. 

And one difference between that period of Trump and his upcoming second term is that he has promised to re-industrialise the United States by relocating companies, as he tried to do in his first term. Because during that period of rupture with the United States, China became the world’s main supplier of manufactured goods. When China permitted US firms a certain complementary activity, relocating their companies there for wage reasons, the conditions for establishing a whole bunch of plants there were established. When they began to compete in manufactured goods and even became the world’s leading supplier, Trump started to identify them as a strategic opponent. 

So I believe this to be the biggest change with the aggravation of technological issues. We not only have communications, electric cars, the satellite and space segment and quantum computing – today’s China is the state with the most technological patents presented in the world, overtaking the United States which still invests the most but China presents the most patents. That is where the Chinese economy walks tall, the product of plenty of cooperation with the United States and also Germany which made China grow. Indeed, China greatly recognises the role of [Henry] Kissinger, a person much admired in China until Trump appeared and this continues, as Diego rightly says. Because if you look at the last statements of [former National Security Advisor Jake] Sullivan, they are along these lines because right up to the end of Biden’s term, Sullivan proposes these tariffs – without even mentioning Trump’s speeches. 

I also agree [with Diego] on the issues of Greenland, annexing Canada as the 51st state and control of the Panama Canal. All this is aimed at China and Trump’s way of halting it, at least in his region of the Americas. The positive part I see of this new phase of Trump has to do with defusing the conflicts in Ukraine, the Gaza Strip and even over Taiwan. 

Trump has made some very aggressive statements regarding the issue of [electronic] chips. We have here a change of stance in relation to international conflicts and that seems positive to me. What needs scrutiny is this scheme of increasing tariffs up to 75 percent on all Chinese goods in some cases, as promised by Trump – whether or not this will impact the interdependence between both economies and also trigger a process of inflation, thus rupturing his programme to stimulate US growth and relocate companies, which is what he tried to do in his first term.

 

Ray Dalio, founder of the biggest investment fund in the world recently said in an interview that the return of factories to the United States is not so much an economic question of more US jobs as the need to be self-sufficient in everything in the event of war. You should not look at this from the viewpoint of capitalism where it might be logical to buy cheaper in China instead of manufacturing dearer in the United States – it has to do with the risk of facing a war. How does that perspective strike you?

DG: I’d say that a large part of that slogan is nationalistic, populist and false. Nor is it verified by the numbers which show that, despite Trump saying that he cornered China, the deficit with China rose with China selling more. I believe things to be much the same now. It's an ideological, not a geopolitical slogan, waving a nationalistic flag. Because look, all this in recent weeks about  incorporating Canada, Greenland, the Panama Canal, etc. is expansionism, presenting himself as a global emperor. It has nothing to do with the peripheral protectionist nationalism we have always known. We didn’t invent it but Peronism played a very important role, and I say that as an ex-Peronist, in the creation of peripheral populist nationalism. He [Trump] has nothing to do with either peripheral or protectionist nationalism – he is conceiving a global empire.

SVN: I think so. He clearly tried it in his first presidency and indeed relocating the companies who had promoted a move to China, precisely because of its labour-intensive economy and other conditions offered by China, had been one of his slogans. This reflection is interesting, there is something in it and Trump has indeed expressed a certain nationalism. His commitment to his voters is based on tariffs and reindustrialisation, contemplating the withdrawal of economic support from Ukraine, also in order to divert it to the domestic productive development of the United States. 

Today I read an article by Nouriel Roubini suggesting that Trump also intended to invest heavily into fossil fuels, dropping electric cars and renewable energy because this ties in naturally with his economic interests. It must also be said that within his Cabinet there are technocrats backing him with concrete economic interests. But I do believe that in his first presidency there was a policy of promotion which was frustrated because General Motors told him: “Now we’re not only producing more cheaply in China but selling more so we’re not coming back,” Similarly Apple told him: “We’ll never relocate because it is already the biggest market now and in 10 years China plans to double its middle class from 400 to 800 [million].” So he speaks to them with ideology and they respond with their pockets, telling him: “No way we’re coming back if our real economic interests are here.” Because that is also something happening worldwide with corporations carrying great weight in political systems. Trump reflects that situation a bit. 

I’m also very worried about this new stage of Trump because of his interventionism which also extends to European states, specifically Germany, Britain and France. [French] President (Emmanuel) Macron has criticised Elon Musk for these interventions via his social networks, very concretely right-wing expressions, in some cases very fascist. So I see components linked to a certain nationalism of Trump such as tariffs and the re-industrialisation of his country which might perhaps be good for the US process but having a global impact which I believe to be negative. Perhaps even for his own economic programme because it could also trigger inflation by suddenly slapping tariffs on all products, including many US-made industrial goods with the economy so intertwined due to global value chains. 

When Trump starts harassing and blocking technology, he begins to realise that when he starts to castigate Huawei, Qualcomm is also there. In other words, there were many firms tied up with each company he wished to dismantle. Now they want to prohibit TikTok, Red Note appears, another Chinese tech giant rapidly positioning itself in that spot, because it all has to do with transcendental technological and industrial processes. That’s why I think that it will be difficult to relocate again in this second stage.

 

BRICS seemed at birth an absolutely pacífic force, probably as a precursor of the global south. Has it been distorted and lost those values as from the Russian invasion of Ukraine while the expansion of BRICS includes countries like Iran, which gives the United States arguments to say that finally it has been converted into an ideological organisation and not simply a club of developing countries?

SVN: If you look at the nature of BRICS, its members and especially those countries entering the expansion, the incorporation of Iran can be attributed to a strategy which has to do with promoting peace in the region. The historic agreement promoted by China between Saudi Arabia and Iran, followed by the incorporation of both countries, should be recalled. And they have passed to being BRICS in global terms by having the countries with the biggest production and reserves of fossil fuels with the possibility of also defining the global agenda in strategic terms such as minerals, energy and food resources, as well as population. There is indeed a reorganisation of emerging countries to seek a more multilateral world. 

At the last Summit in Kazan, in Russia no less, and at the previous one in South Africa, in which the secretary-general of the United Nations participated along with a whole bunch of other countries, the expansion of BRICS was proposed. I do not see this as a bellicose question but quite the contrary. I see that – again taking the pandemic as a catalyst – when you have developed states imposing technological sanctions and monetary blockades in the framework of a war, the emerging countries say that when the United States uses banking codes as a weapon of war, then in the face of the concepts of  Trump, we need autonomy or sovereignty in our monetary systems as well. Discussions on how to use the currency of emerging currencies in their commercial transactions are therefore beginning, as can be seen in the reflections of [Brazil President Luiz Inácio] Lula [da Silva[ at the South African summit where these issues were discussed with the incorporation of six new countries into Brics and trade in their own currencies. Lula made a very valid reflection: “If my leading trade partner is China, why am I using a third currency which does not correspond to  either of us?” Whereupon Trump tweeted very aggressively against the BRICS, proposing that if they decide to change their currency and challenge the hegemony of the dollar, he would slap tariffs, which seems to be his trademark. I find that a sign of weakness and all he is doing is showing that those countries are weaving a multilateral design and sharing technological questions. Many countries, for example, China, have also proposed lowering the tariffs on developing countries within BRICS – i.e. all proposals not setting any conditions within a very multilateral scheme of work. They are similar countries in terms of development and their place in the international system. ([President Javier] Milei himself has said that China does not set any conditions in its bilateral relations. So I really see BRICS as a highly interesting mechanism and deplore Milei’s decision to withdraw Argentina from its invitation. Over 40 countries are already seeking incorporation and the latest summit in Kazan also spoke of a kind of global grain board, of using a virtual currency and of technological exchange – an agenda diametrically opposed to isolationism and technological blockades. So an expanded BRICS seems to me a way out for developing countries and a highly interesting geopolitical format.

DG: I totally disagree with Sabino.

 

The most interesting part of the debate then?

DG: The author of BRICS was an old friend of mine, Jim O’Neill, a director of Goldman Sachs on Wall Street, who wrote up a paper in 2001 at a time when the operative verb was ‘cooperate’ and the United States and China had a most intense dialogue of cooperation. So the four founding countries took up that document elaborated in Wall Street to say no more Third World, we’re inventing a second world. Four countries representing 40 percent of world population and output with dialogue with G7 countries and the traditional central powers. The idea was immediately accepted by all four, who subsequently decided to incorporate a fifth: South Africa. But in that context it was a mechanism for a new dialogue with no more Third World and the Cold War between the Soviet Union and the United States ended. So we passed over to a globalised and cooperative world, creating a group of four countries who were transformed into central interlocutors within that framework of cooperation. 

After that many things happened – I won’t go into that long history but things changed and China appeared as a defiant world power, openly competing with the United States – the nature of Brics changed and the Russian occupation of Ukraine came along, of course, and now the expansion with new members, etc. Today’s BRICS is the organisation of a bloc whose hegemony without doubt belongs to China because we have to understand that the world economy is around US$100 trillion, of which half or some US$50 trillion is shared in almost equal parts between the United States and China. That's the real negotiating-table. This means you have to play on one side or the other. There's not much room because every day the two contenders make themselves increasingly clear. The United States has Hollywood, speaks louder and there is freedom of the press in the West. China has no press freedom and stays quiet so its ground rules are not so well known but they exist. Those are the two great contenders with US$50 trillion between them both. For the second level we have to go down to a quarter (of world output) or some US$25 trillion shared between only three countries: Japan, Germany and India. Below them lies a third level, which is Brazil and Russia accounting for US$2.5 trillion. Look at the difference. Although Russia is killing many people in Ukraine, it’s a supporting actor with no comparison possible within this grand distribution of power. Of course, Trump is now on the lookout for Russia as an ally. (Vladimir) Putin was his until now when they were inventing the conflict with NATO and the European Union and now he’ll seek an agreement with Putin because he’ll get him out of trouble. The two rivals are debating that. So speaking of world peace and of BRICS as promoters of peace and co-existence …

SVN: Multilateralism. They have a bank.

DG: No, no, they’re just names.

SVN: There are objective institutions. A development bank.

DG: What is objective is that the two rivals are in a fight to the death. That is beyond any doubt. Today it is more a cultural than an economic debate because both are essentially capitalist, concentrating huge power. They are two very different concepts. 

It is very difficult from the Western perspective to understand a verticalism which is not dictatorial. I refuse to state that the Chinese government is a dictatorship because dictatorship and democracy are our categories. For us a dictatorship is Venezuela, of that there cannot be any doubt because we’re on the same continent with the same values and they are ghastly dictators. China has a different philosophical system with its seven foundational philosophers  –one of whom was Confucius – who have a vertical concept of society and of political, family and regional power. There is a verticalism which is cultural and has nothing to do with the Communist Party. That is why the best definition of China is the one in all the documents and which comes up every time you talk to a Chinese official, which is market socialism with Chinese characteristics. Up to market socialism we’re doing fine because Germany calls itself a social market economy – we can almost understand one another. Now when those Chinese characteristics come along, that’s where we get lost. And there is no kind of description, you can run through all Yahoo. Except for interpretations, you [Sabino] must surely have written something on Chinese characteristics and I have too but there is no document to tell you from the viewpoint of the Chinese Communist Party what the heck Chinese characteristics are. 

One of the characteristics of Oriental power is mystery. It's very like the Vatican. When we see white smoke or black smoke coming out with 120 cardinals huddling, we don’t know what’s going on. The Holy Spirit whispers in their ear and out pops a Pope. Great, that forms part of our lives. I’m Jewish, not Catholic, but I join in because it really seems to me a superb spectacle. We’re all looking to see if white smoke or black smoke comes out. That mystery, which the Church has historically represented in the West, contains a system of power. For example, nobody knows where Xi Jinping lives whereas we all know where Presidents Milei and Trump live. Xi is a mystery. Today there is no Forbidden City, it is a museum which any tourist can visit with guides whom one pays or with or without audio guides. It is not the imperial residence any longer. The emperor is Xi Jinping and he forms part of an extraordinary mystery because it stems from another philosophy. This is not a criticism but a description to make it more palatable to those who do not know this system, which is guided by principles and values very different from ours. 

That cultural debate, in my judgement, is the central protagonist of the 21st century. For the new generation, my students at university are all born within this century. They will have the enormous privilege of having an enormous chance, which I won’t have, of celebrating the New Year of 2099. Afterwards they will face two major challenges, which nowadays is avoiding a nuclear holocaust because there is a danger of everything going up in smoke as the multiple levels of confrontation could, even accidentally, produce a military confrontation between the two superpowers. What is certain is that the United States still possesses the two most important thirds but the third which China has suffices for not one single stone on the planet remaining in its place. And the second challenge is climate change. The phenomenon we have very recently discovered is that beyond the natural cycle of deterioration whereby life on this planet will unfortunately disappear in thousands of years, such situations have already been provoked – something very new. Before we never even bothered and now it gives us more than the creeps. So the negative impacts generated by mankind must be mitigated. This new scenario enters into the danger of a nuclear holocaust between two powers who at this moment are duking it out to see who runs the world and the danger of an accelerated deterioration causing enormous environmental damage etc. plus a generation which will reach 2099, if not immolated en route, is an an extraordinary scenario. I very much regret that I won’t have the possibility of seeing it.

SVN: I think that just as when we kicked off this debate, Trump is the catalyst. It was the United States who singled out China as its strategic opponent, I think. 

DG: It was Hollywood.

SVN: That’s why he was far from picking it and could hug China again. So I’m not so sure that they’re about to exterminate each other. Trump often overacts in order to negotiate afterwards. And he has indeed negotiated commercially with China, as you rightly said, with the deal semi-concluded so I don’t believe in this scenario of total war.

DG: I said there was a possibility, I did not say it would happen. I hope not.

SVN: It's a question of negotiation, precisely because the United States is losing its position on the global chessboard ....

DG: Sabino has already mentioned and I think Jorge [Fontevecchia] did too the Trojan horse. This is a new scenario with a Trojan horse, we don’t know whose. His name is Elon Musk. For the first time a super-tycoon has appeared who is neither American nor Chinese but South African.

SVN: With plenty of criticisms of [ex-Trump advisor Steve] Bannon.

DG: Extraordinarily powerful, perhaps the richest and most powerful man on earth and enormously intelligent, who appears as a minister without portfolio in the Trump Cabinet with an unprecedented connection. Never in history has there been a personage of this type, who is neither [Henry] Kissinger nor Secretary of State nor Secretary of the Treasury nor president of the Federal Reserve. He is a citizen who from the outside has taken charge of reorganising and streamlining the US state without a public post. [Presidential advisor] Santiago Caputo, to put it in street terms, but with some extra assets. Now this enormous personality, with no room for doubt, has a central characteristic at Trump’s side but also on the side of Xi Jinping – 40 percent of the cars he produces are made in China but with an aggregate since China subsidies half the production, both of his factories and BYD’s. And now a very curious thing since lately I’ve been following this curious personality. The owner of X, he tweeted very little until recently. Now there are around 30 daily, insulting everybody, Canada, Greenland, Denmark, the Panamanians, the Europeans – he’s at war with everybody. I would ask you to see if there are any tweets speaking any evil about China. That is what Trump does not know. Trump is weird in his way, pretty rude in many of his outbursts. 

SVN: But handing out 100-percent tariff barriers.

DG: Because he has another problem, he only sees it from one side. That’s why I say, whose is the Trojan horse? I’m not clear if it’s a Chinese Trojan horse or a US Trojan horse.

 

Production: Sol Bacigalupo.