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The tension between America and China was so great a year ago that Janet Yellen was unable to obtain permission to go there. Today, the US Treasury Secretary is a social media hit in China. Yellen’s two trips – the most recent last week when she was treated to the red carpet – have not resulted in a change of heart in Beijing: America and Europe continue to suffer from the dumping of goods from the China. On Wednesday, Joe Biden announced that he would triple tariffs on Chinese steel imports – a pure election ploy since they only cover 0.6% of total US steel demand. Yet much of the threat has disappeared from the world’s most dangerous relationship. Part of that comes from China’s interaction with an official who reminds many of their favorite grandmother. “There’s a personal element to it,” Yellen says. “This involves respecting and listening to the other party.”
In today’s American climate, even talking to China in a civil manner makes you suspect. This is true even if you “disagree in a pleasant tone,” as Yellen does. This is also how Biden’s national security adviser, Jake Sullivan, interacts with Wang Yi, the Chinese foreign minister. These seemingly unproductive dialogues nevertheless led to a gradual thawing of the Cold War between the United States and China. It is the nature of the media to only notice when things go wrong. Biden’s talk of “managed competition” is neither detente nor war. Yet when tensions between the United States and China rise again, as they undoubtedly will, this gardening will come in handy.
Yellen is unlikely to achieve anything on Chinese dumping. This is despite the fact that the EU and others share US concern that their auto and renewable energy sectors could be disastrously hit by their heavily subsidized Chinese rivals. China’s overcapacity problem is likely to get worse. Elon Musk, whose Tesla is going through a tough time, recently abandoned plans to launch a discounted $27,000 electric vehicle. This would still have been almost triple the price of BYD’s Chinese competitors.
Yellen made such complaints to her counterpart, He Lifeng, to no avail. But from a global perspective, China’s actions seem less egregious. America also subsidizes its electric vehicle and clean energy sectors. Biden’s misnamed Inflation Reduction Act is a Chinese remedy for the same problem. China’s flooding of global markets with cheap renewable energy – batteries, solar panels and wind turbines – is good for emissions but bad for American manufacturing jobs. Yellen says more punitive tariffs will be imposed if China refuses to change its behavior. Either way, humanity as a whole benefits from this race for subsidies.
In some areas, they even work together. When Donald Trump came to power, he abandoned the strategic and economic dialogue between the United States and China, established by George W. Bush and expanded under Barack Obama. In all but name, Yellen has resurrected the economic half of it all. Yellen and He established bilateral working groups on illicit money, global financial stability and green finance.
The first of these includes fentanyl, which is killing hundreds of thousands of Americans and comes primarily from China. Mike Gallagher, chairman of the hawkish House Committee on the Chinese Communist Party, said this week that the CCP “wants more Americans dead.” It’s a caricature. In practice, Yellen says China is finally taking steps to curb the problem. “They are now cooperating on fentanyl,” she said.
The two militaries are also talking to each other again – a safety measure against the risk of a deadly miscalculation over Taiwan. On Tuesday, Lloyd Austin, the US Secretary of Defense, spoke for the first time with his counterpart Dong Jun. Such routines are important precisely because the structural problem between China and the United States is likely intractable. Even if they were not the world’s most powerful autocracy and democracy respectively, a rising China would be destined to take on the world’s biggest dog. Sullivan’s “small yard, high fence” for Chinese semiconductors and AI continues to grow into a mid-sized yard with a taller fence. That could lead to economic decoupling that Biden officials say is not America’s goal.
Either way, Biden is trying to find a way to minimize the risks of a “Thucydides Trap” clash between the emerging and hegemonic powers of our time. This incorporates Chinese President Xi Jinping’s ambitions to supplant America, first and foremost in his own part of the world. It also takes into account the loudest voices in Washington urging Biden to do what it takes to keep China in its place. The reality is that if China and the United States do not learn to tolerate each other, global warming will appear to be the least of our problems. Sometimes the dog that doesn’t bark deserves to be given a bone.
