The Room Where It Happened

by John Bolton;

  Back in Washington, on Monday, December 3, we gathered in the Oval to assess the results. Trump was delighted, happy with the reaction of global stock markets, and he still liked my idea to bar Chinese exports based on stolen US intellectual property. Mnuchin, however, was fighting his new role, asking, “Who’s in charge?” about the coming negotiations. Trump stuck with Lighthizer as the lead, saying, “I don’t see what’s wrong with that. Treasury is a whole different world.” He wanted Lighthizer: “Mnuchin puts out a different kind of signal. I don’t know why you [Mnuchin] want to be involved. Do you know how to help him [Lighthizer]? Get the dollar fixed.” And then away Trump went, attacking Fed Chairman Powell, his favorite punching bag, for keeping interest rates too high. Then, turning to Lighthizer, Trump said, “On this, I want your attitude, not Steve’s. Double or triple the purchases of ag products… If we don’t get a great deal, forget it. We’ll be back here where we were [increasing tariffs]. Schumer likes this. Tariffs will be much better received in ninety days.” And the new rounds of negotiations began for what Trump called more than once “the biggest deal in history. Not just the biggest trade deal, but the biggest deal ever.”

  The negotiations came complete with theatricals in the Oval Office starring Trump and Liu He, broadcast live on cable news. As time passed, the March 1 deadline became clearly unattainable, so Trump blew past it, saying “substantial progress” had been made.15 I thought it signaled weakness, showing what he really wanted was a deal. In fact, of course, the ninety-day period was always illusory; it was impossible to believe China would concede on the “structural issues” in three months, having developed its practices over decades. But the decisive play came in May, when the Chinese reneged on several key elements of the emerging agreement, including on all the key “structural issues” that were really the heart of the matter. At the time, I was consumed with Iran’s growing threat in the Persian Gulf region, but Lighthizer’s call snapped me to attention. This was a serious setback for the deal advocates, which Lighthizer said he and Mnuchin believed was attributable to Liu He and his allies’ having lost control of the politics back in Beijing.

  Lighthizer came by my office the next morning, May 6, at eight a.m. to discuss the situation. He said that in Beijing the week before, the Chinese had retreated widely on specific commitments they had made, such as amending existing regulations, repealing statutes and passing new ones (for example, to protect intellectual property), and similar concrete steps that would show they were serious on the structural issues. Without these specific commitments, only vague assertions of intent were left, which, going back years with China, had always failed to produce results. Liu He said he was proposing merely an optical “rebalancing” of the draft deal’s text, which enumerated many steps China would take but very few by the United States (with good reason!). The overall impact was to water down what Beijing would actually have to do, and the Chinese were also now pressing many other unhelpful revisions. Lighthizer said both he and Mnuchin concluded that Liu had lost control of the negotiations, and which they believed Liu had in effect admitted to them in Beijing. Liu was still planning to be in Washington at the end of the week, in the pattern of home-and-away meetings the negotiators had followed, but it was unclear whether he would have anything new or different to say.

  There was now no prospect of reaching agreement in what Mnuchin had billed as “the last round” of talks, especially since many other serious issues remained unresolved. Trump had been tweeting threats of new tariffs, so it was also entirely possible Liu would not come at all. Later in the day, Lighthizer announced he was teeing up the next round of tariff increases to go into effect on Friday, which Trump was clearly prepared to impose. Liu came to Washington with nothing new, and the discussions at his offices ended early. There was no Liu He meeting with Trump. The trade war was still on.

  Trump spoke with Xi Jinping by phone on June 18, ahead of 2019’s Osaka G20 summit, when they would next meet. Trump began by telling Xi he missed him, and then said that the most popular thing he had ever been involved with was making a trade deal with China, which would be a big plus politically. They agreed their economic teams could continue meeting. The G20 bilateral arrived, and during the usual media mayhem at the start, Trump said, “We’ve become friends. My trip to Beijing with my family was one of the most incredible of my life.”16

  With the press gone, Xi said this is the most important bilateral relationship in the world. He said that some (unnamed) political figures in the United States were making erroneous judgments by calling for a new cold war, this time between China and the United States. Whether Xi meant to finger the Democrats, or some of us sitting on the US side of the table, I don’t know, but Trump immediately assumed Xi meant the Democrats. Trump said approvingly that there was great hostility among the Democrats. He then, stunningly, turned the conversation to the coming US presidential election, alluding to China’s economic capability to affect the ongoing campaigns, pleading with Xi to ensure he’d win. He stressed the importance of farmers, and increased Chinese purchases of soybeans and wheat in the electoral outcome. I would print Trump’s exact words, but the government’s prepublication review process has decided otherwise.

  Trump then raised the negotiations’ collapse in May, urging China to return to the positions it had retracted. Breezing by China’s failure to do anything on fentanyl and its seizure of Canadian hostages (not to mention the American hostages), both discussed in Buenos Aires, Trump urged that the two sides start from where they had left off in May and pursue the negotiations to conclude the most exciting, largest deal ever made. Out of nowhere, Xi answered by comparing the impact of an unequal deal with us to the “humiliation” of the Treaty of Versailles, which had taken Shandong province from Germany but given it to Japan. Xi said with a straight face that if China suffered the same humiliation in our trade negotiations, there would be an upsurge of patriotic feeling in China, implicitly indicating that that feeling would be directed against the United States. Trump manifestly had no idea what Xi was referring to, but said that a treaty of non-equals was not in Xi’s blood. History being a very easy subject for Trump once it was broached, he implied China owed the US a favor for knocking Japan out of World War II. Xi then lectured us on how China fought for nineteen years, and relied mainly on themselves to defeat the Japanese aggressors. Of course, this was just as nonsensical; the Chinese Communists had spent most of the war ducking Japan and trying to undercut the Chinese Nationalists. The war ended when it did because we used atomic bombs, but Xi was reciting history from the Communist catechism, not that Trump understood that either.

  Toward the end of the trade issue, Trump proposed that for the remaining $350 billion of trade imbalances (by Trump’s arithmetic), the US would not impose tariffs, but he again returned to importuning Xi and China to buy as many American farm products as they could. Then, they would see if a deal were possible. Trump asked Liu He if we could make a deal from where we were before China backtracked in May. Liu looked like a deer in the headlights, speechless, clearly not wanting to answer. After a pregnant silence, Trump highlighted Liu’s awkwardness by saying he had never seen him so quiet. Turning to Xi, Trump asked him what the answer was, since he was the only one with the courage to answer it. Xi agreed that we should restart the trade talks, welcoming Trump’s concession that there would be no new tariffs, and agreeing that the two negotiating teams should resume discussions on farm products on a priority basis. “You’re the greatest Chinese leader in three hundred years!” exulted Trump, amending it a few minutes later to be “the greatest leader in Chinese history.” After a drive-by discussion of North Korea, since Trump was on his way to Seoul that evening, that was that on trade.

  Xi returned to the Liu children, recalling that they had been discussed in Buenos Aires on December 1, calling them Chinese citizens (they were actually dual US-Chinese citizens). Stunningly, he said quite casually were barred from leaving China to get them to cooperate in a money
-laundering investigation of their father, arguing that by failing to cooperate, the Lius were endangering Chinese national security. Xi then said pointedly that December 1 was the same night that Meng Wanzhou, Huawei CFO, had been arrested. He concluded vaguely that the two sides could stay in touch. Of course, Xi was then perfectly comfortable complaining that not enough visas were being issued for Chinese students who wanted to come to the United States!

  Trade talks with China resumed after Osaka, but progress was negligible. Trump seemed inclined to hedge, tweeting on July 30, against the advice of Mnuchin and Lighthizer:

  China is doing very badly, worst year in 27 – was supposed to start buying our agricultural product now – no signs that they are doing so. That is the problem with China, they just don’t come through. Our Economy has become MUCH larger than the Chinese Economy is last 3 years…

  …My team is negotiating with them now, but they always change the deal in the end to their benefit. They should probably wait out our Election to see if we get one of the Democrat stiffs like Sleepy Joe. Then they could make a GREAT deal, like in past 30 years, and continue…

  …to rip off the USA, even bigger and better than ever before. The problem with them waiting, however, is that if & when I win, the deal that they get will be much tougher than what we are negotiating now… or no deal at all. We have all the cards, our past leaders never got it!

  As the negotiations continued, there was simply no indication of real movement from China. After yet another Lighthizer-Mnuchin visit to Beijing, they reported to Trump in the Oval on August 1. Trump had nothing good to say, opening with, “You shouldn’t have gone there. It makes us look weak.” He had actually been musing about more tariffs the day before, saying to me with a wink and a smile, “I’m much more like you than you know.” Trump was now even more convinced China was waiting to see who won in 2020, believing “they want the President to lose.” Trump finally said, “I want to put tariffs on. They’re tapping you along,” and we turned to whether to impose tariffs on another $350 billion of Chinese exports to the United States. Trump said to Mnuchin, “You talk too much. Don’t be scared, Steve.” Lighthizer for some reason worried that our trade war with China was hurting Europe, which only added fuel to the fire, provoking the familiar Trump refrain, “The EU is worse than China, only smaller,” as he decided to impose the next round of tariffs on Beijing, via Twitter, of course:

  Our representatives have just returned from China where they had constructive talks having to do with a future Trade Deal. We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing. More recently, China agreed to…

  …buy agricultural product from the U.S. in large quantities, but did not do so. Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States—this never happened, and many Americans continue to die! Trade talks are continuing, and…

  …during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%…

  …We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!

  This was a huge decision, causing great angst in Trump’s economic team, which was pretty much where things stood when I resigned on September 10. Subsequent negotiations did lead to a “deal” announced in December, which was, in substance, less than met the eye.

  * * *

  On December 1, 2018, the same day as the lengthy Xi-Trump dinner in Buenos Aires and as they discussed at the meeting in Osaka, Canadian authorities in Vancouver arrested Meng Wanzhou, the CFO of Huawei, another Chinese mega-telecom firm. (We had heard on Friday the arrest might occur on Saturday, when Meng, daughter of Huawei’s founder, landed in Canada.) Because this arrest was based on our case of financial fraud against Huawei for, among other things, concealing massive violations of our Iran sanctions, it struck me as straightforward. Things were busy in Buenos Aires, to say the least, and I had learned enough watching Trump with Erdogan to understand I needed to have all the facts in hand before I briefed Trump.

  As the implications of the arrest spread through the media, however, China’s US friends grew upset. At the December 7 White House Christmas dinner, Trump raised Meng’s arrest, riffing about how much pressure this put on China. He said to me across the table that we had just arrested “the Ivanka Trump of China.” I came within an inch of saying, “I never knew Ivanka was a spy and a fraudster,” but my automatic tongue-biting mechanism kicked in just in time. What Wall Street financier had given Trump that line? Or was it Kushner, who had been engaged in a mutual courtship on China matters with Henry Kissinger since the transition? Trump complained that Huawei was China’s largest telecom company. I said Huawei wasn’t a company but an arm of China’s intelligence services,17 which slowed him down. Combined with what Trump later said about the Uighurs during this same dinner, I could tell we were in a different cycle of Trump’s thinking on how to handle China. I wondered what it would take to get him off appeasement and back onto his more aggressive approach, as when he gave Lighthizer the lead in trade negotiations.

  Trump made matters worse on several occasions by implying that Huawei also could be simply another US bargaining chip in the trade negotiations, ignoring both the significance of the criminal case and also the far larger threat Huawei posed to the security of fifth-generation (or 5G) telecom systems worldwide. This is what the black-hole-of-trade phenomenon did in twisting all other issues around Trump’s fascination with a big trade deal. Huawei posed enormous national-security issues, many of which we could only allude to in public statements. The idea that this was merely trade bait both discouraged and confused our friends. Mnuchin fretted constantly about how this or that prosecution for hacking or other cybercrimes would have a negative effect on the trade negotiations, which Trump sometimes bought and sometimes didn’t. At one point, he said to Mnuchin, “Steve, the Chinese see fear in your eyes. That’s why I don’t want you negotiating with them.” Those were the good days. There were more that weren’t.

  As the trade negotiations proceeded, we began producing draft Executive Orders to secure US telecom systems and information technology assets generally. Each step of the way, we had to fight the alleged impact on the China trade negotiations. At times, some Administration economic-policy officials didn’t think Huawei was a threat, just another competitor, whom we national-security types were trying to disadvantage as a protectionist measure to help US firms.18 Trench by trench, we overcame this resistance. I urged in several Oval Office meetings that we follow Zhou Enlai’s World War II admonition, in conducting negotiations with Chiang Kai-shek even as Communist and Kuomintang forces were locked in armed combat, that their policy should be “fighting while talking.” How could Xi Jinping object to our following Zhou’s advice? It didn’t get a rise out of Mnuchin. Trump said, nonetheless, “I don’t disagree with John,” but he followed through only fitfully and grudgingly. We continued putting important defenses in place, but far more slowly than was prudent. And, of course, Trump himself continued to be part of the problem, asking Lighthizer, at one point in April, whether we should say something in the trade deal about cyberwarfare. This idea bordered on the irrational, or worse, and it quickly disappeared from official US circles, but where else might it be toddling along, leading to incalculable mischief if it reemerges in the next Xi-Trump meeting?

  We ran into similar obstacles internationally as we sought to alert our allies to Huawei’s threat and that of other state-controlled Chinese firms. We also spread awareness of how treacherous China’s Belt and Road Initiative was, based on “debt diplomacy,” luring countries with seemingly advantageous credit terms, then getting them hooked financially, from which Third World nations especially cou
ldn’t extract themselves. In December 2018, at the Heritage Foundation, I laid out the Administration’s Africa strategy, stressing our concern for the unfair advantage China had taken of many African nations. In Europe, many countries had done so much business with Huawei, they found it hard to disentangle themselves. With the UK, for example, the discussions were very difficult, although attitudes changed significantly once Johnson became Prime Minister and installed a new Cabinet. But even then, it was hard slogging because of the high level of dependence on Huawei that Britain had built up over an extended period.These legitimate worries should have led us to focus on rapidly getting new entrants into 5G markets, not how we would mitigate the consequences of continuing to patronize Huawei.19

  Japan took a tough view.20 During Trump’s May state visit, Abe had said China is the largest strategic challenge in the mid- to long-term. They completely disregard established rules and order. Their attempts to change the status quo unilaterally in the East and South China Seas are unacceptable. Abe encouraged Trump to maintain US-Japan unity against China, and much more. This was how to conduct a strategic dialogue with a close ally. Australia’s Prime Minister Scott Morrison was also clear-eyed, seeing Huawei pretty much the way I did, and New Zealand also took a surprisingly but gratifyingly hard line.21