A more confident Xi Jinping will be hosting Narendra Modi, Vladimir Putin and about 20 other world leaders for the two-day SCO summit in Tianjin beginning on Sunday - more confident in the belief that he has been able to tame Donald Trump, while the rest of the world, including America, has been hit hard by the US President's actions.
When Trump won the US presidential election in November last year, Beijing was more worried than any other power. Indians were thrilled. Trump proved to be a good friend of India during his first term and had formed a personal bond with Modi. Europeans were sceptical, but not too concerned.
But Trump has proved them all wrong. In the first seven months at the White House, he has isolated or annoyed almost all US allies and strategic partners, including Canada, the European Union, Japan, Brazil and India. But China, America's main rival and security threat, couldn't believe its luck that the man they considered a tough nut would crack so easily.
Trump Did Promise Action Against China
Beijing had feared that Trump would resume where he left off in his first term, and impose more sanctions. His successor, President Joe Biden, not only continued with those measures but imposed some of his own to restrict China's access to American technology. During his election campaign, Trump promised to be even tougher with Beijing in his second term.
Just a month after his inauguration, Trump signed a document called "America First Investment Policy", highlighting concerns about China's Communist Party government. The document warned, "PRC-affiliated investors are targeting the crown jewels of United States technology, food supplies, farmland, minerals, natural resources, ports, and shipping terminals." The document promised to "establish new rules" to stop that.
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Some of Trump's first trade tariffs were directed against China. Then came his "Liberation Day" tariffs in April, where China was hit along with almost every other country. Trump also announced a ban on the sale of advanced chips for AI to China on security grounds.
But this time, Xi's Beijing was ready. Although it was a huge gamble, China responded by announcing equally hard tariffs against the United States. At one stage, the tariffs from each side touched 125%.
Blinking First
More significantly, China restricted the supply of critical magnets and other minerals, which were vital for America's civil and defence industries but were controlled by China. It came as a big shock to the US. Trump perhaps did not realise how deeply Americans were dependent on Chinese products. The China-US tariff war created havoc in the American stock and bond markets, forcing Trump to surrender before Xi.
The Trump administration signed an agreement with China in Geneva on May 12 to reduce tariff rates. Unlike India and other countries facing high tariffs, Trump also extended the deadline for concluding a trade agreement with Beijing. China also forced the Trump administration to lift the ban on advanced chips. Xi's gamble paid off, and he realised that China was in a very strong position to deal with the United States and could choke the US economy almost at will.
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In fact, China had been preparing for this trade battle for a long time by reducing its dependence on America while making the world ever more reliant on Chinese supplies. After making his country the factory of the world, Xi launched a 10-year programme in 2015 to make the country technologically self-reliant. This involved massive investments in infrastructure and R&D. Most targets of this programme have already been met.
China also diversified its trade partners. By the end of last year, in terms of total value, Beijing traded more with the European Union and ASEAN than with the United States. China's trade with India has also continued to grow, despite the border dispute and Beijing's material and diplomatic support to Pakistan.
Beijing Extracted Concessions, Too
This is where Trump's favourite policy, trade tariffs, has failed most miserably. By allowing China to dictate terms on trade, Trump also ended up giving China political concessions. Unlike previous US administrations, including his own first term, the current Trump government has ignored human rights issues in China and has been quite accommodating on the question of Taiwan, a renegade Chinese province.
Trump not only imposed new 20% tariffs on Taiwan at the end of July but he also refused to allow Taiwanese President Lai Ching-te to use New York as a stopover during Lai's scheduled international travel - departing from a long tradition in US-Taiwanese relations.
Tariffs on other countries have also helped China, and the measures will make these countries more dependent on Beijing. This dependency is likely to go beyond business and trade, even though most of these countries, particularly China's neighbours, view Beijing with great suspicion. Its style of operation in Africa, for instance, has made China deeply unpopular there.
Trump Is Hurting His Own Country
Western analysts and politicians have expressed concern that Trump's policy will hurt America's own interests. They find it baffling that when Washington should be containing China and shore up US defences in the Indo-Pacific, the administration is imposing punitive tariffs on India, South Korea and Japan, the United States' Asian allies, as well as on European partners and Canada.
On Wednesday, Democrats on the US House Foreign Affairs Committee condemned Trump for singling out India with Tariffs for purchasing Russian oil, rather than sanctioning China, which buys more such oil. They warned that the decision was hurting Americans and sabotaging the US-India relationship.
Tariffs are a tax on imports, which makes related items expensive to consumers. Ultimately, US consumers will suffer as prices of imported goods will rise. There are already reports from different parts of the United States of small businesses being closed down and factory workers losing their jobs.
The average US tariff rate reached 18.6% in early August, the highest level in nearly a century, according to Budget Lab, a research centre. This number was only 2.5% when Trump took office in January.
Hoover's 1930 Act
Trump's tariffs are similar to the Smoot-Hawley Tariff Act of 1930, signed by President Herbert Hoover, going against the advice of many economists who warned that the levies would prompt retaliatory tariffs from other countries. That is precisely what happened. The US economy plunged deeper into a devastating financial crisis that it would not recover from until the Second World War.
Trump, who regards himself as the smartest of any global leader and anyone in the United States, is also threatening the health of the US economy in other ways. For example, it has launched a war on the Federal Reserve, has sacked one of the members of the board, Lisa Cook, and has been putting pressure on its chairman, Jay Powell, to cut interest rates.
The US Federal Reserve is known for its autonomy. It independently sets short-term interest rates, which is crucial for investors' trust in the US economy. If the Federal Reserve acts under political pressure, its credibility will be damaged and long-term rates will rise, which are governed by markets.
The American Economy Is In Trouble
All this comes at a time when the US economy is already facing a number of serious issues. The dollar is losing its value and its reputation as a safe currency, inflation is increasing, and debt has reached new highs. The gross US debt is now nearly $37 trillion, nearly as large as that of all the other major advanced economies combined. Last year, the US spent $880 billion on interest payments, which is higher than America's defence budget.
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"There is a growing perception among banks and foreign governments that hold trillions of dollars in US debt that the country's fiscal policy may be going off the rails," says Professor Kenneth Rogoff of Harvard University. He warned that "with the United States taking on such extraordinary levels of debt, the dollar no longer looks unassailable, particularly amid other uncertainty about US policy".
Of course, one can't blame Trump for the accumulation of such high levels of US debt, but his tariffs and other policies are making the situation worse for the American economy.
It's Politics, Too
Trump's actions have serious political ramifications as well. Since he assumed office, trust in the United States has substantially gone down. With his flip-flops, Trump has made the United States an unreliable partner. No one can be sure of whether an agreement signed with the US will not be overturned later.
Even treaty partners of the United States, including NATO members, are not sure if they can rely on the United States for their security. France and the United Kingdom recently announced an agreement to begin providing extended nuclear deterrence in Europe for themselves, and allies such as South Korea, Poland, and even Japan are now contemplating acquiring their own nuclear weapons.
But Trump doesn't seem to care. His 50% tariffs on India are widely regarded as being a response to India not giving him credit for the ceasefire between India and Pakistan in May. Brazil's case is similar, where 50% tariffs are a result of the country's courts acting against Trump's friend and former President, Jair Bolsonaro, for trying to stage a coup.
One big problem for Trump and the United States is that unlike in his last term, this time, he has surrounded himself with ultra-loyalists who are not known to be experts in global affairs. The only exception is Secretary of State Marco Rubio, a former senator. In the Senate, he used to be a big critic of China and a friend of India. But now, he is following the Trump line.
Wake-Up Call For The World
Trump's actions are a wake-up call for India, Brazil and other countries. While Europe, Japan and South Korea have acquiesced to Trump's demands, Brazil and India have refused to capitulate. The BRICS group of countries is closing ranks. India is in the process of improving ties with China and strengthening those with Russia, whose leader, Vladimir Putin, is expected to visit India in the autumn.
Interestingly, around the time Putin visits New Delhi, Xi is likely to be hosting Trump in Beijing. Although the circumstances are different, this will be the second time in the modern history of these two powers that a US President would be wooing a Chinese leader. The first time this happened was in 1972, when Nixon visited Beijing to meet Mao with the aim of ending 20 years of frosty relations between the two countries.
Of course, one should not expect a seismic shift in the US-China ties this time as the two superpowers will remain main competitors and rivals for years to come. But Trump, who is a fan of Nixon, could decide on a deal with Beijing, where it could give the country even more concessions over Taiwan and even agree to pull out some US forces from the Indo-Pacific.
Trump believes in regional spheres of influence and may agree to hand over the control of the Indo-Pacific to China, in return of Beijing pulling out from America's backyard. Trump's tariffs on India are an indication that his administration no longer wants to promote India to counter China.
A Path Away From BRICS And SCO
We need to remember that BRICS and SCO are China-led fronts and that Beijing cannot be a trusted partner for most countries. China, like the US, is also trying to build a bloc of countries it can control. Smaller nations have no option but to join one or the other, but powers like India should choose an independent path, while not cutting off completely from either side.
America's unreliability under Trump has thrown up an opportunity for India to form stronger partnerships with other democracies like Brazil, Mexico, Canada, South Africa, the EU, Japan, South Korea and Australia. As we know, these countries are also unhappy with both superpowers and are planning to reduce their dependence on them.
While democratic countries can not abandon the United States, they should not ignore fears that its policies under Trump will hasten the demise of America's global power. It's better to start working on an alternative now to deal with a resurgent China.
(Naresh Kaushik is a former editor at the Associated Press and the BBC News.)
Disclaimer: These are the personal opinions of the author
