Trump drops Taiwan gambit, a relief for Xi and Asia

People walk in Taipei, Taiwan

In interviews after his election win, Donald Trump wondered why he shouldn’t use the One-China policy as a bargaining chip with Beijing to get better trade terms.

Three weeks into his presidency, the threat to upend U.S. policy on Taiwan – a breakaway province in China’s eyes – is off the table. The White House said Trump agreed in a phone call last week with China’s President Xi Jinping to respect the policy, which has been the basis of ties since the 1970s.

The move instantly reduces tensions for a simple reason: Taiwan is the biggest flash point that could spark a military conflict between the world’s largest economies, and suck in U.S. allies in the region. Now, the focus turns to avoiding a trade war that could deal a blow to global growth.

“It was in no one’s interests to see conflict between China and the U.S.,” said Michael Bell, global market strategist at JPMorgan Asset Management. “This was the one issue that was really difficult for China. If that has been put to one side, then they can negotiate in a much more level-headed way.”

The One-China policy acknowledges that China and Taiwan are part of the same country. China considers the island a province and has made recognition of the policy the foundation for diplomatic ties with the U.S. and all other countries. The U.S. continues to sell weapons to Taiwan and is obligated to defend the island under a 1979 law.

The White House statement said Trump agreed to respect the policy at the request of Xi during the call, which it described as “lengthy” and “extremely cordial.” In turn, Xi called for enhanced cooperation on a myriad of issues, from trade to investment to military affairs.

“Facing an extremely complicated global situation and rising challenges, there’s a greater need for continuing to enhance cooperation between China and the U.S.,” Xi said, according to state broadcaster China Central Television.

Signs of a detente had emerged recently. In Tokyo last week, Defense Secretary James Mattis said he didn’t see any need for “ dramatic military moves” in the South China Sea, and urged a diplomatic solution. Still, in China’s eyes, Trump’s move to back down on the One-China policy wasn’t a win because Taiwan was never negotiable in the first place.

“It is tempting to say Beijing won Round One, but that would be misleading,” said Steve Tsang, director of SOAS China Institute, University of London. “I should think that Xi is pleased with the outcome, but is still waiting to see what Trump really wants.” Bloomberg