Trump signing this legislation and the muted reaction is a reminder that in economic diplomacy the threat is usually more powerful than the reality... The US looks like the bank robber with a gun who pulls the trigger and all that comes out is a flag that says “Bang!”
That’s convenient this time for Trump since it clears the way for the deal he wants with China. But, like the August declaration that China is a currency manipulator (which went off with a whimper) it also betrays the weakness of some US economic diplomatic “weapons”.
The bill Trump signed sets up an annual certification system for Hong Kong and its special trade status. But removing that status would really hurt the Hong Kong economy more than mainland China’s in the long run. It would erode what makes Hong Kong exceptional.
Tariffs fall into the same category, of course. They are more valuable as a threat than in action. We’ve seen that in how support for them has eroded and the appetite for escalation has dissipated as they - and the uncertainty they have brought - have dragged on the US economy.
The point is that in firing all these economic weapons the US under Trump may have actually exposed how ineffective they are. And that may erode American power in the long run...
I know there are already analyses out there saying that China’s threats of retaliation are empty. I guess that’s a fair point. But not sure either side is coming out of this looking immensely more powerful. Or that any of this is going to help resolve the situation in Hong Kong.
