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Tension between America and China was so bad a year ago that Janet Yellen could not get permission to go there. Now the US Treasury secretary is a social media hit in China. Yellen’s two trips — most recently last week when she got red carpet treatment — have not yielded U-turns in Beijing: America and Europe continue to suffer from China’s goods dumping. On Wednesday, Joe Biden said he would triple tariffs on Chinese steel imports — a pure election gimmick since they only cover 0.6 per cent of total US steel demand. Yet much of the menace has drained from the world’s most dangerous relationship. Some of that stems from China’s interaction with an official who reminds many of their favourite grandmother. “There is a personal element to this,” Yellen says. “It involves respect and listening to the other side.”
In today’s US climate, even talking to China in a civil fashion marks you out for suspicion. This is true even if you are “disagreeing in an agreeable tone”, as Yellen does. This is also how Biden’s national security adviser, Jake Sullivan, interacts with Wang Yi, China’s foreign minister. These seemingly unproductive dialogues have nevertheless led to a gradual thaw in the US-China cold war. It is in the media’s nature only to notice when things go wrong. Biden’s talk of “managed competition” is neither detente nor war. Yet when US-China tensions rise again, as they undoubtedly will, this gardening will help.
It is unlikely Yellen will get anywhere on Chinese dumping. This is in spite of the fact that the EU and others share America’s concern that their car and renewable energy sectors could be disastrously hit by heavily subsidised Chinese rivals. The problem of China’s overcapacity is likelier to get worse. Elon Musk, whose Tesla is hitting a rough patch, recently abandoned plans to launch a cut-price $27,000 EV. It would still have been almost triple the price of China’s BYD competitors.
Yellen has laid out such complaints to her counterpart, He Lifeng, to little avail. But from a global perspective, China’s actions look less egregious. America is also subsidising its EV and clean power sectors. Biden’s misnamed Inflation Reduction Act is a China-lite remedy for the same problem. China’s flooding of global markets with cheap renewables — batteries, solar panels and wind turbines — is great for emissions but bad for US manufacturing jobs. Yellen says more punitive duties will result if China refuses to change its behaviour. Either way, humanity as a whole is benefiting from this particular subsidy race.
In some areas they are even working together. When Donald Trump came to office, he scrapped the US-China strategic and economic dialogue that was set up by George W Bush and expanded under Barack Obama. In all but name, Yellen has resurrected the economic half of that. Yellen and He have set up bilateral working groups on illicit money, global financial stability and green finance.
The first of those includes fentanyl, which is killing hundreds of thousands of Americans and mostly comes from China. Mike Gallagher, chair of the hawkish House committee on the Chinese Communist party, this week said that the CCP “wants more dead Americans”. This is cartoonish. In practice, Yellen says China is finally taking steps to curb the problem. “They are being co-operative now on fentanyl,” she says.
The two militaries are also talking again — a fail-safe against the risk of lethal miscalculation over Taiwan. On Tuesday, Lloyd Austin, the US defence secretary, spoke to his counterpart, Dong Jun, for the first time. Such routines matter precisely because the structural problem between China and the US is probably insoluble. Even if they were not the world’s most powerful autocracy and democracy respectively, a rising China would be destined to clash with the world’s top dog. Sullivan’s “small yard, high fence” for Chinese semiconductors and AI continues to expand into a medium-size yard with a higher fence. That could lead to the economic decoupling that Biden officials swear is not America’s goal.
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Either way, Biden is trying to find a way to minimise the risks of a “Thucydides trap” clash between our age’s rising and hegemonic powers. This incorporates Chinese President Xi Jinping’s ambitions to supplant America, first of all in his own part of the world. It also takes into account Washington’s loudest voices urging Biden to do what it takes to keep China in its place. The reality is that if China and the US do not learn to tolerate each other, global warming will look like the least of our problems. Sometimes, the dog that does not bark deserves to be given a bone.