Trump must now grapple with how to confront Beijing's crackdown on Hong Kong

Beijing’s move to tighten its grip on Hong Kong drew swift condemnation from U.S. officials as they weighed options for new sanctions in the latest escalation of a brewing cold war between the two superpowers.

The strongest step readily available to the Trump administration would be to revoke Hong Kong’s special economic and trading status with United States. That could deal a major blow to a Chinese economy still recovering from the COVID-19 pandemic by curbing exports and limiting China's ability to take advantage of Hong Kong’s long-standing role as a global financial hub.

But it’s far from clear that Beijing’s leaders will back down. And with nationalistic feelings rising rapidly in both countries, relations between the world’s largest economic and military powers seemed to have taken a dangerous new turn.

“We are really in a very, very dangerous period, extremely dangerous for confrontation, and I will say for a possible war,” said Cheng Li, director of the John L. Thornton China Center at the Brookings Institution.

Chinese President Xi Jinping has already launched a broad crackdown on dissent in mainland China, and he appears willing to risk paying a high price for subduing Hong Kong, whose relative autonomy has been a thorn in the side of both the Communist government and some ordinary Chinese.

Xi has apparently concluded that with the United States preoccupied with the pandemic, its economic devastation and the looming presidential election, he has an opportunity for drastic steps, possibly including making a move in Taiwan.

China's plans announced Thursday would impose a sweeping new security law on Hong Kong, marking Beijing’s determination to wrest control of the semiautonomous territory after massive pro-democracy protests last year.

“I read this as a material increase in the long-term chances of armed conflict over Taiwan,” said Derek Scissors, a China scholar at the American Enterprise Institute. Taiwan also operates with large autonomy even though it is claimed as a Chinese territory.

“The one country, two systems [model] was an appeal to the Taiwanese that they could rejoin the mainland and maintain their civil liberties. Xi Jinping just said, 'That's a joke.' And the U.S. has to respond to this," Scissors said.

Taiwan is an even more fraught issue than Hong Kong, which was guaranteed a high degree of autonomy under the “one country, two systems” pact that accompanied Britain’s handover of the territory in 1997.

U.S. protection of Taiwan dates to the end of World War II, when Nationalist Chinese fled there to escape the Communist takeover of mainland China.

Analysts said it would take possibly six months for Chinese officials to prepare and approve a new national security law on Hong Kong, creating a window in time for diplomacy.

Whether tensions escalate further or cool down depends largely on what the Trump administration and Congress do in the days and weeks ahead. What’s at stake goes beyond Hong Kong.

Until the pandemic, Trump was usually reluctant to take on China on matters outside trade and commercial relations.

He showed little interest in the massive pro-democracy demonstrations in Hong Kong last year and has frequently talked about his personal chemistry with Xi, often showering praise on the Chinese leader even as Xi tightened his authoritarian rule.

On Friday, Trump did not make public comments about Hong Kong. But some analysts believe that the pandemic has changed the calculus and that Trump will be all but forced to take a harder line.

With the U.S. economy sinking into a painful recession and threatening Trump’s reelection in November, China hawks in his administration have blamed China for its early cover-up of the outbreak and the devastation wrought by the pandemic. Secretary of State Michael R. Pompeo has promoted a theory that the virus emerged from a lab in Wuhan, though most scientists dismiss that idea.

China hard-liners on Friday urged Trump to break commercial ties with Beijing and apply tough sanctions.

“I think President Trump is going to be at the end of his goodwill with Xi here,” said Stephen K. Bannon, a former top Trump strategist who has been waging a campaign to fight China’s Communist leadership. “It’s an outrage,” he said of Beijing’s proposed new security powers over Hong Kong.

“How can you have a [trade] deal with the Chinese Communist Party, whether it’s Phase 1 or continue on, when they’ve obviously reneged on the deal they signed with the British and then authorized by the United States?”

Scissors said Trump may be weighing whether the promised Chinese purchases of U.S. goods are better for him politically than ratcheting up the confrontation with China. "The Chinese have obviously harmed the president's political interests with COVID and now their action on Hong Kong," he said. "But he hasn't decided yet that retaliating is better for him than the exports he gets out of the Phase 1 deal."

If Trump doesn’t act, lawmakers may try to force his hand.

On Thursday, Sens. Patrick J. Toomey (R-Pa.) and Chris Van Hollen (D-Md.) introduced legislation to impose sanctions on Chinese officials and entities that enforce the proposed national security laws. And the measure would sanction financial institutions that do business with entities violating Hong Kong’s autonomy, which was guaranteed under the pact until 2047.

But there seemed little reason to expect the measure to force Beijing to abandon its imposition of direct control over the island territory.

Pompeo tacitly acknowledged that Beijing’s renunciation of the 1997 agreement was likely to stand when he called China’s plan a “death knell” for Hong Kong's autonomy.

“The United States strongly urges Beijing to reconsider its disastrous proposal, abide by its international obligations, and respect Hong Kong’s high degree of autonomy, democratic institutions, and civil liberties, which are key to preserving its special status under U.S. law,” Pompeo said.

U.S.-China relations have been deteriorating on several fronts, particularly on the commercial side, which once had been the ballast in bilateral relations.

In recent days, the Trump administration has moved to further close off American technology to Huawei, China’s telecommunications equipment giant. The administration has pressured federal government pension administrators from investing in Chinese stocks and is considering blocking Chinese firms from listing shares on U.S. stock exchanges.

Nonetheless, Beijing's move against Hong Kong suggests that the Chinese leadership has decided it can pursue a tougher strategy in the larger confrontation with Washington.

In recent weeks, tensions have focused largely on the COVID-19 pandemic.

Trump and administration officials have repeatedly blamed China for the virus, accusing it of spreading death and economic devastation to the United States, Europe and the developing world.

Beijing has answered in kind and has sought to portray itself as a vital helping hand by supplying personal protective equipment and medical supplies to other countries at a time when the United States has struggled to meet its own needs, much less send aid to others.

America’s divisive preoccupation with how to fight the pandemic and respond to the troubled economy has probably been seen by Xi as an opportunity to plow ahead with the Hong Kong clampdown, said Ho-fung Hung, a political economy professor at Johns Hopkins University’s School of Advanced International Studies.

“The U.S.-China relations are already deteriorating, so Beijing now has less consideration of U.S. reaction, because it is going to be aggressive and negative anyway,” he said.

Eliminating Hong Kong’s special trade and financial status would clearly hurt Beijing, coming on top of U.S. tightening of export controls and its threat to shut American financial markets to Chinese companies.

Hong Kong is a respected financial hub where many mainland firms are listed and have access to international capital. Hong Kong also provides a base to access American technology that’s increasingly shut out for Chinese companies operating on the mainland.

However, such broad sanctions also would hurt Hong Kong and its residents, as well as American companies, which have long operated in Hong Kong as a more reliable and secure outpost for commercial activity. And there would almost surely be retaliation on the part of Beijing.

But Hung said Beijing's new action is essentially forcing Washington's hand.

“If the U.S. doesn’t respond beyond verbal condemnation, then Beijing will take it as a sign of weakness that the U.S. is not ready to support Hong Kong and penalize China for that,” he said.

“And then it will embolden China to double down on cracking down on Hong Kong’s autonomy and freedom. And not only on Hong Kong, but on other fronts."