Earlier this week, Speaker Mike Johnson outlined his foreign policy approach in a speech at the Hudson Institute that was dubbed by the WSJ editorial board as “the most important speech of the week.” On the same day, the RNC Platform Committee approved the 2024 GOP Platform, a document personally edited by former president Donald Trump.
Meanwhile, Democrats have been seeking to change the narrative on President Joe Biden’s debate performance in part by tying the contents of the Heritage Foundation’s Project 2025’s 180-day Transition Playbook to Trump and all Republican candidates. For his part, Trump denied having any part in Project 2025‘s work or connection to its Playbook.
Taken together, these events, documents, and statements help clarify the path forward on U.S. China policymaking, particularly with respect to the U.S. House and a potential Trump 2.0 Administration. Below is a summary and analysis of what this all means.
U.S. HOUSE
House Majority Leader Steve Scalise and his team have been peppered with questions for the last few months about the scheduling and contents of a long-rumored “China Week” on the House floor. Observers believe such a week would likely include consideration of the bipartisan BIOSECURE Act, as well as non-controversial China-related policy from relevant committees, much of which has been endorsed by the House Select Committee on China and its bipartisanreports.
The biggest question for Scalise and his team, however, relates to his role in mediating a compromise between House Financial Services Committee Chairman Patrick McHenry and House Foreign Affairs Committee Chairman Michael McCaul on restricting certain outbound U.S. investment to China. The McHenry/McCaul negotiation was prompted at the end of 2023 by Speaker Johnson following the removal of senators John Cornyn’s and Bob Casey’s outbound language in the FY24 National Defense Authorization Act (NDAA), which received 91 votes in the Senate.
The Cornyn/Casey amendment required that investors notify the Treasury Department prior to making specific investments in sensitive technologies in China, Russia, Iran, and North Korea. Despite its bipartisan Senate support, the amendment was removed at the behest of Chairman McHenry during the end-of-year bicameral NDAA negotiations.
Discussions on an outbound compromise in the House had stalled until recently reinvigorated by the Speaker who has been in discussions with Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries about a bipartisan “China package.” The desire for such a package was spelled out more clearly by the Speaker in his speech at the Hudson Institute on Monday. In his speech, Johnson identified China as the United States’ “single-greatest threat” and criticized President Biden for not treating China “like an enemy.” This is strong language from the Speaker and it gives credence to Congress’s bipartisan and bicameral focus on aggressively confronting China.
China Package
With respect to the aforementioned House China package, the Speaker described using “every tool” at Congress’s disposal to empower the “the next Administration to hit our enemies’ economies on day one.” The Speaker’s notional legislative timeline includes votes this fall and enactment by the end of the year. Tools Johnson specifically identified for a “significant package of China-related legislation” were:
- Punishing Chinese military firms that provide material support to Russia and Iran
- Legislative “options” to restrict outbound investments in China
- Voting on the BIOSECURE Act
- Reining in de minimis privilege for any good subject to Section 301 trade enforcement tariffs
Additional actions and policy recommendations endorsed by Johnson in his speech included:
- Renewal of the China Select Committee in the next Congress
- Reinvestments (i.e., increased spending) in military readiness
- Increased capacity in the maritime sector’s shipbuilding and shipyards
- Re-shoring and safe-shoring supply chains
- Invigorating domestic manufacturing
- Expansion of military and economic relationships with India, Taiwan, South Korea, Australia, the Philippines, Vietnam, and the UK
For clues into what else the Speaker might push for inclusion in a China package, see the 130 policy recommendations of the Republican Study Committee’s (RSC) National Security Task Force’s 2019 report to counter China, deter Russia, and advance American interests in the Middle East (a task force Johnson created when he was RSC Chair).
Outbound Investment
Perhaps the biggest remaining question mark for congressional action this year is whether Congress will address outbound U.S. investment in sensitive or advanced technologies and products that the Chinese exploit for military, intelligence, surveillance, and/or cyber-enabled advantage. This debate was further invigorated by Treasury’s issuance of a Notice of Proposed Rulemaking (NPRM) on June 21, required by President Biden’s August 9, 2023, outbound investments Executive Order (EO). The reaction from the Hill to Treasury’s NPRM was largely positive.
As such, we view the prospects for a compromise between McHenry and McCaul as relatively low. McHenry remains adamant in using (and expanding) existing sanctions authorities to counter China. Scalise is believed to favor this approach, as well. McCaul, meanwhile, favors codification of the Administration’s outbound investment regime (i.e., “reverse CFIUS”), a position that appears aligned with Speaker Johnson.
But noteworthy is McHenry’s rhetoric about his approach being in line with Trump while McCaul’s is in line with Biden. Given such a stark political contrast and the impasse that has spanned this Congress, a legislative compromise on outbound investment that emerges as part of a China week on the House floor this fall or as an amendment to the final FY25 NDAA at the end of this year seems unlikely. As such, the Administration’s NPRM will likely act as the governor in curtailing outbound U.S. investments for the remainder of 2024 (and potentially beyond).
TRUMP 2.0
Outbound investment policy in 2025 and beyond will be determined by the outcome of this year’s presidential and congressional elections. With Trump’s polling prospects increasing and President Biden losing ground, attention has rightly returned to what a Trump 2.0 Administration might look like, both from a policy and personnel perspective.
Trump’s worldview, as evidenced by his first term, is defined by aggressive trade policy as much as anything else. Out of office and now on the campaign trail, Trump has continued to focus on U.S. trade deficits and the use of tariffs as both a foreign policy tool, as well as a domestic economic accelerant. Outside protectionist voices like former USTR Robert Lighthizer, the Coalition for a Prosperous America, and former policy advisor Peter Navarro help echo Trump’s pro-tariff views. Many Republicans on the Hill now support tariffs, as well, especially self-described “populists” like senators Josh Hawley, JD Vance, and Marco Rubio, as well as Ways and Means Committee Chairman Jason Smith and a myriad of House conservatives.
2024 GOP Platform
This week, Trump made his clearest policy endorsements to date with the RNC Platform Committee’s approval of the 2024 GOP Platform, a document he was personally involved in editing. The Platform was approved by a vote of 84-18, with some pro-life delegates and outside groups upset with removal of language calling for greater restrictions on abortion. A simple list of 20 proposals, the Platform includes a number of trade, economic, and geopolitical goals, including:
- End inflation, and make America affordable again (#3)
- Make America the dominant energy producer in the world, by far! (#4)
- Stop outsourcing, and turn the United States into a manufacturing superpower (#5)
- Large tax cuts for workers, and no tax on tips! (#6)
- Prevent world war three, restore peace in Europe and in the Middle East, and build a great iron dome missile defense shield over our entire country – all made in America (#8)
- Strengthen and modernize our military, making it, without question, the strongest and most powerful in the world (#12)
What’s clear is that Trump’s rhetoric on trade imbalances has not changed. If anything, it has been emboldened by the growing bipartisan attention on perceived threats from China. The fifth chapter of the platform further details economic and trade policy, committing-in part-to:
Rebalance Trade. Our Trade deficit in goods has grown to over $1 Trillion Dollars a year. Republicans will support baseline Tariffs on Foreign-made goods, pass the Trump Reciprocal Trade Act, and respond to unfair Trading practices. As Tariffs on Foreign Producers go up, Taxes on American Workers, Families, and Businesses can come down.
Secure Strategic Independence from China. Republicans will revoke China’s Most Favored Nation status, phase out imports of essential goods, and stop China from buying American Real Estate and Industries.
Bring Home Critical Supply Chains. Republicans will bring critical Supply Chains back to the U.S., ensuring National Security and Economic Stability, while also creating Jobs and raising Wages for American Workers.
Finally, the Platform reaffirms Reagan’s axiom of “peace through strength.” Among its provisions, the document commits the U.S. to championing “Strong, Sovereign, and Independent Nations in the Indo-Pacific, thriving in Peace and Commerce with others.”
Project 2025 Playbook
While Trump made news this week distancing himself from Project2025, the initial Playbook published by a coalition of over 100 groups provides additional details and context around many of the commitments made in the GOP Platform. Most interesting is the section authored by Peter Navarro, entitled “The Case for Fair Trade.” The entire 50-plus page chapter is worth reading, but it affirms the case for attacking the World Trade Organization’s (WTO) Most Favored Nation (MFN) rule by imposing higher tariffs through passage of the proposed U.S. Reciprocal Trade Act (USRTA) and confronting the “broader existential threat posed by the Chinese Communist Party (CCP) in its quest for global dominance.” These proposals are mirrored in the GOP Platform.
Originally introduced in 2019, USRTA would provide the president with the authority to bring any American trading partner that is currently applying higher nonreciprocal tariffs to the negotiating table. If that trading partner refused to lower tariffs to U.S. levels, the president would then have the authority to raise U.S. tariffs to match or mirror the foreign trading partner’s tariffs. What’s more, Navarro suggests taking a second look at the border adjustment tax (BAT) originally proposed and championed by Paul Ryan and Kevin Brady at the start of the Tax Cut and Jobs Act (TCJA) process.
With respect to China, Navarro and the Playbook pose the following rhetorical question:
The question is whether the next President should seek to decouple economically and financially from Communist China as America’s first best response to China’s unrelenting aggression or continue efforts to negotiate with an authoritarian country and brutal dictatorship with a well-established reputation for failing to abide by any agreements it enters.
The Playbook makes the case for decoupling, and Navarro suggests any of the following policy proposals, many of which were under consideration during Trump’s first term, would help achieve that goal:
- Expand tariffs on all Chinese products (with an exception for key pharmaceuticals)
- Financial and tax incentives for onshoring
- Stop Chinese abuse of de minimis exemptions
- Prohibit Chinese investments in certain U.S. enterprises
- Ban Chinese social media apps
- Prohibit U.S. pension fund investments in Chinese stocks (and inclusion of Chinese bonds in U.S. portfolios)
- Delist certain Chinese stocks
- Prohibit use of Hong Kong clearinghouses for U.S. capital seeking to invest in China
- Sanction companies that facilitate China’s use of Great Firewall surveillance
- Close all Confucius Institutes in the U.S.
- Reduce or eliminate issuance of visas to Chinese students or researchers
In the interest of covering both sides of the Republican trade policy perspective, the Playbook also includes a free trade counterargument section. Much like during his first term, Trump will likely surround himself with robust debate.
Personnel
No doubt voices like Navarro (and Lighthizer) will carry weight on policymaking and regulatory action in a second Trump Administration. Personnel is policy and it is worth analyzing the varying voices on China in the Trump orbit.
Obvious examples include former National Security Advisor (NSA) Director Robert O’Brien and former Council on Economic Advisers (CEA) Chair Tyler Goodspeed. But less analyzed and often overlooked is former Deputy NSA Director Matt Pottinger.
Pottinger and Garnaut Global offer deeply informed sourcing on China, resulting in influence with the House Select Committee on China and no doubt within Trump world (Matt was in the deputy role at the White House for all four years of Trump’s first term). The Wire detailed Garnaut Global’s analytical prowess in an April profile, crediting its principals for the start of the West’s China decoupling movement.
OUTLOOK/ANALYSIS. What is true is that China policy continues to serve as the one unifying area of concern and policymaking between both political parties (e.g., TikTok ban, bipartisan AI working groups, BIOSECURE, etc.), as well as within much of the EU and United States’ global allies writ large. An attempt at economic decoupling with China will only continue to accelerate next year from a policy and regulatory perspective, regardless of the November election outcome.
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