2017 promises US-China tensions, resurgent Russia, and trade turbulence

2016 has been a tumultuous year around the world on several fronts, thanks to the migration crisis, terrorism, increasing nationalism, and – perhaps most of all – the election of Donald Trump as the next US president. But next year could be just as turbulent, particularly as Mr. Trump takes the reins in Washington. Here is a quick tour of places and stories to keep an eye on in 2017.

US relations with China

Outgoing US President Barack Obama and Chinese President Xi Jinping always agreed that their nations’ relationship was the most important in world affairs. And President-elect Trump spent more time on the campaign trail talking about China than anywhere else.

But under Trump, “it won’t be business as usual,” predicts Bonnie Glaser, a China expert at the Center for Strategic and International Studies in Washington.

What kind of business it will be, it’s probably too early to say. But even before he has taken office, Trump’s barrage of tweets and other public comments suggest that he could be ready for a major overhaul of Washington’s China policy.

Complaining that China is “raping” the United States by its unfair trade practices, Trump has pledged to restore equity to commercial ties. He has also hinted that he might take a fresh look at Washington’s “one China policy,” which acknowledges that Beijing claims Taiwan, but leaves the island’s precise status ambiguous.

Any steps that called current American policy into question “would risk a major confrontation with China,” warns Ms. Glaser. “Beijing is not ready to re-negotiate agreements … that they see as the bedrock of US-China relations.”

Another potential flashpoint: the South China Sea, which Beijing claims almost in its entirety – along with the islets, reefs, and shoals that dot its waters – in defiance of an international legal ruling this year and of US policy.

So far, in its drive to build those reefs into military airstrips, China has stayed below the threshold that might provoke a strong American reaction. But a Trump administration could lower that threshold, and show less tolerance for Chinese adventurism.

“The next administration will be very confrontational with China,” says David Shambaugh, who teaches Chinese politics at George Washington University. “I’m not sure they appreciate China’s sensitivities or strength; Beijing could do all sorts of things to make life difficult and painful for America.”

The risk, he warns, is that a general mood of confrontation between Beijing in Washington could spawn an incident that could get out of hand. “In the worst case scenario, they could come to blows in a military clash,” says Professor Shambaugh. “That is not out of the question.”

Russia’s role in the world

One thing is plain as the world looks toward 2017. It cannot ignore Vladimir Putin’s Russia.

Twenty-five years after the humiliating collapse of the Soviet Union, President Putin is well on his way to making Russia the “ubiquitous state and indispensable partner” of his dreams, says Andrew Monaghan, who follows Russian affairs at Chatham House, a London-based think tank. “Expect Russia to be very active” on the diplomatic, military, and cyber fronts, he says.

Syria offers the most dramatic illustration of Russia’s ambitions. It was the Russian Air Force’s brutal bombing campaign that turned the tide in Syrian President Bashar al-Assad’s favor.

And the week before Christmas, Mr. Putin hosted Turkish and Iranian officials for political talks on how to end the civil war. US Secretary of State John Kerry was nowhere to be seen. Nor is he expected to be invited to Russian-planned talks in Kazakhstan between the Syrian government and opposition.

The Kremlin has made no secret of its intention to thwart the United States, and the West more broadly, whenever it sees fit.

In a foreign policy “concept” document published this month, Moscow framed its view of the world as a “competition … in the form of dueling values,” and announced it intended “to prevent military interventions or other forms of outside interference” justified on humanitarian grounds.

Russia “reserved the right to react very strongly to unfriendly actions, including … retaliatory or asymmetrical measures.”

Russia’s oil-dependent economy is weak, its state structures inefficient, its soft power limited. But it has a strong military that is getting stronger, and Putin is ready to use it.

Russian troops have intervened in Georgia, Crimea, eastern Ukraine, and Syria. Those operations “have boosted Russia’s military confidence,” says Nicu Popescu, an analyst at the European Union’s Institute for Strategic Studies in Paris. “They could be tempted to use military force more easily than before, if they think that will give them influence.”

Especially nervous in the wake of Russia’s invasion of Crimea are the three Baltic states, NATO members neighboring Russia, which has been bolstering its military forces in the region.

According to the NATO treaty, an invasion of Estonia, Lithuania, or Latvia would mean war. But US President-elect Trump hinted on the campaign trail that he would not necessarily feel obliged to come to their aid. And there is much speculation about the prospect that Trump would be more conciliatory toward Moscow than has President Obama.

However Trump and Putin get on, Russia and the West will remain divided over fundamental issues, not least Washington’s plan for a global missile defense system. Moscow considers the scheme a threat to its national security, the foreign policy document made clear. If the United States goes ahead with it, Moscow “reserves the right to take adequate retaliatory measures.”

Trade troubles

As for next year’s outlook for world trade, the grease to globalization’s wheels, it is bleak. Some are calling it the end of globalization.

Trade among members of the Group of 20, the leading world economies, has been pretty much stagnant this year. And now a wave of protectionist, anti-trade sentiment is washing over the United States and Europe.

That seems to have put paid to plans for a Transatlantic Trade and Investment Partnership (TTIP), a putative free-trade deal between the United States and the European Union that has run into strong political headwinds in Europe.

The political climate, with elections due next year in Germany and France, has put TTIP negotiations “on a very long pause,” says Caroline Freund, a trade analyst at the Peterson Institute for International Economics, a Washington think tank.

And Trump’s election as US president appears to have sounded the death knell for the Trans Pacific Partnership, a free-trade agreement that had already been agreed on by 12 Pacific rim countries, including the US but not China.

Trump, who has long disdained international trade deals that he says make it easier to offshore US jobs to cheaper locations, has said he will tear up the TPP.

He is also threatening to slap 45 percent tariffs on all Chinese exports to the United States. This could be rhetoric, building up a position in advance of negotiations with Beijing to make China open its market more to US goods and investment.

“The most hopeful outlook is that this works,” says Dr. Freund, “and that instead of a trade war we get some change in China that boosts world trade and the US economy. But I do not think that is particularly likely.”

More probably, she forecasts, China would retaliate big time by canceling orders for Boeing aircraft and buying European instead, or making life even harder than it already is for US companies in China, or drying up the flow of Chinese students who have been flocking to US colleges and filling their coffers for the past decade.

Before any of that could happen, Trump might be dissuaded by US businessmen from imposing across-the-board import tariffs on Chinese goods. “So much of what American consumers buy is manufactured in whole or in part in China,” points out Debbi Elms, head of the Singapore-based Asian Trade Centre. “And a lot of what US companies produce is produced in China, and a lot of their profits come off the China market.”

Under those circumstances, she warns, “a trade war could be quite catastrophic.”