US-China Summit—and the Future of US Policy on Taiwan

The first of up to four planned summits this year between the US and China did not produce major agreements and left many important issues to be resolved before the next scheduled US-China summit September 24. A subtle shift in US policy on Taiwan may be the summit’s most lasting impact.

• Business results included further US action on selling advanced Nvidia chips to vetted Chinese partners. China promised to purchase additional US oil, soybeans, and aircraft, though there are few details.
• On Iran, the parties agreed that the Strait of Hormuz should reopen to all commercial traffic and that Iran should not possess a nuclear weapon. The US may lift sanctions on some Chinese companies that have purchased sanctioned Iranian oil.
• Questions remain on future US trade and tariff policy on China, particularly the interplay between the Administration’s Section 232 tariff investigations and the trade truce with China running through October.
• A principal focus of the summit was Taiwan. The President said he would consider a pending arms sale to Taiwan as a “bargaining chip” with China. Linkage between US-China trade issues and US policy on Taiwan and other US security commitments in the region worries regional allies.

Business Focus Shifts Quickly to Geopolitics

While the US -- whose delegation included several prominent business executives -- wanted to keep the focus for the summit on business and economic relations, China, knowing this, raised Taiwan directly rather than giving the US a free concession by not discussing the island. China described Taiwan as “the most important issue in China-US relations. If handled properly, the bilateral relationship will enjoy overall stability. Otherwise, the two countries will have clashes and even conflicts, putting the entire relationship in great jeopardy.”

The results of the summit were mixed for US business. Nvidia received permission to sell H200 chips to 10 approved Chinese firms, although no sales have yet been made. Purchasers will be able to purchase either directly from Nvidia or through approved distributors reportedly including Foxconn and Lenovo; they will also have to certify that they have “sufficient security procedures” and will not use the chips for military purposes.¹ For its part, Nvidia must certify that it has enough chips to meet US needs and pay 25% of the revenues from the sales to the US.

According to the US, China also made promises to purchase US oil, “billions of dollars” of soybeans, and Boeing aircraft. However, the US did not confirm the actual purchases of aircraft and instead stated that the “essence of China-U.S. economic and trade relations is mutual benefit and win-win cooperation.”² China has not confirmed the volume of soybean purchases, and no other broad agreements were announced.

Iran

The US and China agreed that Iran should never have a nuclear weapon and that the Strait of Hormuz should remain open “to support the free flow of energy” (not a change in policy for either country). More significantly, China said it is opposed to “militarization of the Strait and any effort to charge a toll for its use” and that China may be interested in purchasing additional US oil. In addition, the US said it would consider lifting sanctions on Chinese companies that have purchased Iranian oil, including the large refiner Hengli Petrochemicals.³

Trade and Tariffs

In addition, while the Chinese readout spoke of an agreement to build “a constructive and strategically stable China-US relationship,” the US readout did not.⁴ Instead, the President simply stated in an interview that “a lot of good” came from the summit and that the leaders “settled a lot of different problems that other people wouldn’t have been able to solve,” including “some fantastic trade deals for both countries.”⁵

Different US and Chinese readouts of bilateral meetings are nothing new; each side wishes to emphasize the points most important to it. But this is a long list of issues to leave for later, which not only could complicate planning for the September summit in Washington but also raises questions as to what concessions the US is prepared to make in return. The Section 232 investigations on excess structural capacity and forced labor, which could lead to higher tariffs on a number of countries and the EU, include China, and the US has noted in the past both Chinese excess structural capacity in a variety of industries and concerns over forced labor. The investigations could conclude as early as July -- but the one-year trade truce negotiated last year does not expire until October. How the US reconciles these two policy goals -- new tariffs to replace the “Liberation Day” and fentanyl-related tariffs which the Supreme Court struck down in Learning Resources v. Trump and the desire to maintain smooth trade relations with China and what the US Trade Representative termed a “willingness” to extend the truce -- is a major unresolved question after the summit.

Taiwan

The US readout of the meeting also did not mention Taiwan, consistent with the US’ earlier stated goal not to discuss the issue. However, the contrasting views of the two leaders were stark.

During the summit, the President said that he would think about arms sales to Taiwan and make a decision shortly on a pending $14 billion sale. While the Secretary of State said that US policy on Taiwan has “not changed” and “remains consistent now” with past Administrations,⁶ it seems clear that the US did make at least one change in policy. One of the 1982 “Six Assurances” that has governed US-Taiwan relations since the Reagan Administration is that the US “has not agreed to consult with the PRC on specific arms sales to Taiwan.”⁷ After the summit, the President said that “1982 is a long way [away]. What am I gonna do? Say I don’t want to talk about it because I have an agreement that was signed in 1982? We discussed arms sales . . . in great detail [.]”⁸

This has been, though, the basis of US policy: not to discuss arms sales with China other than to reaffirm that they are for defensive purposes only. US arms sales to Taiwan are governed by the Taiwan Relations Act of 1979, enacted after the US recognized the People’s Republic of China (PRC) in 1978, which states that US recognition of the PRC “rests upon the expectation that the future of Taiwan will be determined by peaceful means and that any effort to determine the future of Taiwan by other than peaceful means, including by boycotts and embargoes is considered a threat to the peace and security of the Western Pacific area and of grave concern to the United States.” The Act also states that the US “shall provide Taiwan with arms of a defensive character and shall maintain the capacity of the United States to resist any resort to force or other forms of coercion that would jeopardize the security, or social or economic system, of the people of Taiwan.”⁹

“Independence”

Another consistent theme in US policy has been that the US “does not support” Taiwan’s independence. As the President said after the summit, “I’m not looking to have somebody go independent. And you know, were supposed to travel 9,500 miles to fight a war. I’m not looking for that.¹⁰ He added, in some of the strongest language any President has used against Taiwan, that “[t]hey have somebody there [presumably a reference to the governing Democratic Progressive Party] that wants to go independent. . . . They’re going independent because they want to get into a war and . . . they figure they have the United States behind them.”¹¹

While the summit did not feature a formal change to US Taiwan policy, Taiwan’s response to the summit was also strong. Taiwan’s Presidential Office stated on May 16 that the “Republic of China” (Taiwan’s formal name in its constitution) is a “sovereign, independent democratic country.”¹² Taiwan also acknowledged the President’s statement that US positions on Taiwan “remain unchanged” and thanked the President for “longstanding, continuous support for security in the Taiwan Strait, including the ongoing provision of [arms], with the scale and monetary value of these sales repeatedly reaching historic highs.”

From one important perspective, the statement does not reflect a change in Taiwan’s policy, as a former Taiwan President also claimed that Taiwan is already independent. Further, Taiwan was careful to clarify that Taiwan’s government favors “maintaining the status quo across the Taiwan Strait” (in essence, that Taiwan would not declare formal independence). Part of the reason for the strong reaction may be a Chinese push to have the US formally state that the US “opposes” Taiwan independence rather than the current policy of “does not support” it. The difference is significant, as it could imply that the US would not come to Taiwan’s defense if China attacks because it “opposes” Taiwan’s independence.

Linkage and Geopolitical Impact

More directly, the President also said that arms sales to Taiwan are “a very good negotiating chip” which he is holding “in abeyance, and it depends on China.” He added that he would “like to see everybody making chips over in Taiwan come into America.” This directly challenges Taiwan as well, as the “silicon shield” is one reason for the importance of the status quo to US economic and national security. Treating Taiwanese security and longstanding US policy in favor of arms sales under the Taiwan Relations Act as a bargaining chip in economic negotiations would mark a major shift in US policy in the Asia-Pacific and worries key Asian allies including Japan, South Korea, and the Philippines about the future of US policy in the region and US commitments to mutual defense.

Peer Competitor—or Simply Peer?

During the summit, China highlighted the need to avoid the “Thucydides trap,” the idea popularized by political scientist Graham Allison that incumbent and rising powers can easily fall into war. To that end, China suggested it and the US “should be partners rather than rivals, achieving mutual success and shared prosperity, and finding a proper way for major powers to coexist in the new era,”¹³ while even suggesting an analogy between China’s rise and the “Make America Great Again” campaign.

Implicit in this is China’s sense that its rise in power has proceeded to the point where it stands effectively as a global peer of the United States. While US military planners have pointed to China as a “peer competitor,” the concept here is far broader, encompassing economic, diplomatic, and soft power as well as military power. Perhaps with a different meaning, the President echoed similar language after the summit: “[i]t’s the two great countries. I call it the G-2. This is the G-2. I think [the meeting] will go down as a very important moment in history” -- effectively acknowledging the point that China is in many respects the peer and equal of the US.

A Visit to Zhongnanhai Garden

On the final day of the summit, the leaders toured the garden in the Zhongnanhai governing compound near the Forbidden City in Beijing where senior Chinese government officials have their offices.¹⁴ One way to interpret the visit is as an unusual honor for a visiting leader. Another is more subtle: showing a visiting US leader trees that are older than the 250 years of US independence, even mentioning that some are a thousand years old, effectively reminds the US that China is an old country with a proud heritage, one that values stability, and one with the patience to outlast short-term difficulties and setbacks in pursuit of longer-term goals. It suggests that while the US is focused on short-term advantages and temporarily deals, China continues to play a longer game and in fact has reached peer status with the US. That perception, once achieved, would be very difficult to reverse. In all events, US-China relations will remain on the front burner of US national security and economic security policy as preparations now begin for the next scheduled summit in Washington on September 24.