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WASHINGTON — The Trump administration is moving to take a more aggressive stand against China on economic, diplomatic and scientific issues at the heart of the relationship between the world’s two superpowers, further fraying ties that have reached their lowest point in decades.
White House aides this week have prodded President Trump to issue an executive order that would block a government pension fund from investing in Chinese companies, officials said — a move that could upend capital flows across the Pacific. Mr. Trump announced on Friday that he was restricting the use of electrical equipment in the domestic grid system with links to “a foreign adversary” — an unspoken reference to China.
The open rivalry between the two nations has taken on a harder and much darker shading in the months since the new coronavirus spread from a metropolis on the Yangtze River across the globe, speeding up efforts by hard-liners in both Washington and Beijing to execute a so-called decoupling of important elements of the relationship.
Those in Washington advocating a more stable relationship with China, including some of Mr. Trump’s top economic advisers, warn that the administration must take care not to overreach.
China is likely to emerge from the recession caused by the pandemic faster than other nations. The United States — still reeling from the virus, with more than one million infected and more than 64,000 dead — will probably rely on economic activity in Asia to help prop up its own economy. Part of that involves getting Beijing to comply with a trade agreement signed in January.
China controls a vast supply of the masks and protective gear needed by American hospitals. And if China develops a vaccine first, it will wield a powerful card, one that will bolster its global standing and give it leverage over the health of hundreds of millions of Americans.
“We’ve entered an entirely new phase of U.S.-China relations, rather than the intensification of the previous one,” said Jude Blanchette, a China scholar at the Center for Strategic and International Studies. “This new paradigm is defined by the proliferation of flash points, the downward spiral of hostility, the rise in zero-sum thinking, and the breakdown of mediating and mitigating institutions.”
“The rising tensions are propelled by deeply nationalist administrations in both Beijing and Washington, D.C., and domestic populations that are coming to view a rupture in the bilateral relationship as inevitable or even desirable,” he added.
Mr. Trump himself has vacillated in his public statements on China. In recent weeks, he has said he is “not happy” with China. But on March 27, the day after a call with President Xi Jinping of China, Mr. Trump wrote on Twitter: “Much respect!” Throughout the winter, he praised Mr. Xi’s handling of the outbreak.
The administration’s tougher moves on China are partly a result of growing anger among some White House aides.
Mr. Pompeo; Matthew Pottinger, the deputy national security adviser; and Peter Navarro, a trade adviser, have long advocated hard policies on China. Steven Mnuchin, the Treasury secretary; Larry Kudlow, the director of the National Economic Council; and Jared Kushner, a senior adviser and Mr. Trump’s son-in-law, have pushed for a more measured approach. But in late April, Mr. Kushner decided to support a tougher line out of frustration with China over the pandemic and the flow of medical supplies, according to people familiar with his thinking.
“We want to make sure that we’re bringing manufacturing back; we can’t be relying on other countries,” Mr. Kushner said on Fox News on April 29. “And I imagine that after this, we’ll be putting in place very strong strategies to make sure that America doesn’t have to rely on any other countries for critical supplies in the future.”
Advisers to Mr. Trump are conducting a wide search for options to hold China accountable for the pandemic. One potential move being discussed is suing China for reparations, though the administration would need to find a way around an American law that follows international law in granting sovereign states immunity. Legal experts say that would be difficult, and China has already denounced the idea.
The president has said his administration is doing an “investigation” into China. Advisers say the inquiry involves intelligence agencies, tasked to learn how the virus originated, and the Justice Department.
“Along with lost opportunities to fight the pandemic, climate change and other transnational threats, U.S. efforts to punish China could backfire badly,” said Jessica Chen Weiss, a professor of government at Cornell University. “Weakening sovereign immunity to sue China could boomerang back.”
Mr. Trump has been less vocal about other recent actions on China. In late March, he signed into law the Taipei Act, a bipartisan bill that requires the State Department to support Taiwan’s diplomatic relations around the globe. In 1979, the United States switched formal diplomatic relations to China from Taiwan, a self-governing island claimed by Beijing, but Washington continues to support Taiwan in ways that anger Chinese leaders, including with arms sales.
Mr. Trump’s announcement on electrical equipment on Friday appeared to be another attempt to constrain China. He declared a national emergency and ordered the energy secretary to ban the import of foreign equipment for power plants and transmission systems, arenas where China is becoming increasingly active around the world.
While Russia is considered a major threat to the power grid — the United States has long complained about Russian-made code that could sabotage the system, and has implanted code of its own in Russia’s own grid — the risk from China comes from its growing role in supplying components.
Last month, several agencies asked the Federal Communications Commission to ban China Telecom Americas from domestic networks. That overlaps with a global campaign by the administration to undermine efforts by Chinese companies, notably Huawei, to develop next-generation 5G communications networks.
Taken together, the moves in the power and telecommunications industries amount to the most far-reaching by any administration to strip Chinese equipment and services out of critical American infrastructure.
An executive order being weighed by Mr. Trump would stop the Thrift Savings Plan, the retirement savings vehicle for federal government employees, from switching to a different mix of investments that would move more capital to China and other emerging markets this year, according to people familiar with the deliberations.
The White House is also moving ahead with plans to replace the members of the board of the Thrift Savings Plan and is finalizing its list of nominees, the people said. The terms of all five of the current board members have expired, though they can continue to serve until they are replaced.
The proposed order and bills in Congress that are supported by some White House officials are aimed at curbing American investment in Chinese companies that are opaque or believed to be involved in human rights abuses, and at limiting the access those companies have to U.S. capital markets.
Roger W. Robinson Jr., the president of RWR Advisory Group, a research firm, said the move on the Thrift Savings Plan was “merely the tip of the proverbial iceberg when it comes to Chinese corporate bad actors in our capital markets.”
Some White House advisers, including Mr. Mnuchin, have cautioned against the steps, saying they could disrupt American financial markets or the trade deal that the United States signed with China in January. Banking executives have also warned of adverse consequences.
Analysts say China appears to be falling short of the monthly purchases it would need to make to fulfill its commitments in the trade deal to buy an additional $200 billion of American goods by the end of the next year — not surprising given a sharp economic slowdown in China that is leading to plummeting consumer demand.
“When it becomes apparent by this fall that China won’t be able to meet its purchasing commitments — regardless of Covid — it sets the Phase 1 deal up for strong criticism in the campaign season,” said Wendy Cutler, a vice president of the Asia Society Policy Institute. “The Trump administration may feel cornered into taking enforcement actions against China, even on dubious grounds, to show how tough they are.”
Reporting was contributed by Sheryl Gay Stolberg, David E. Sanger, Michael Crowley and Julian E. Barnes.
