The True Dangers of Trump’s Economic Plans
His Radical Agenda Would Wreak Havoc on American Businesses, Workers, and Consumers
Since late 2023, the Houthis in Yemen have posed an extraordinary challenge to global shipping. As a result of the Iranian-backed group’s relentless attacks on commercial vessels in the Red Sea, intended to pressure the United States and its allies over Israel’s war in Gaza, several of the largest international shipping companies have been forced to reroute their vessels around Africa to avoid the sea entirely. According to one estimate, the freight costs of shipping from Asia to Europe rose by nearly 300 percent from October to March. In an effort to contain the crisis and defend this vital trade corridor, the United States and the United Kingdom have conducted hundreds of airstrikes against Houthi sites in Yemen.
Yet China, whose vast global trade accounts for a sizable portion of Red Sea traffic, has largely stood by. Beijing sends $280 billion worth of goods per year through the Red Sea’s Bab el Mandeb Strait, accounting for nearly 20 percent of China’s total maritime trade. And as a result of the Houthi attacks, it faces rapidly mounting shipping costs and supply chain disruptions at a moment when the Chinese economy is already under pressure. Nonetheless, Beijing has done little in response. In public, Chinese officials have limited themselves to affirming the importance of safe and open seas; in private, they have tried to negotiate with the Houthis and their Iranian supporters to secure the safe passage of vessels linked to China—although multiple such ships have been attacked.
China’s restraint in the Red Sea raises important questions about its larger strategy in the Middle East. Before the current war in the Gaza Strip, Beijing appeared to be asserting a growing role in the region, including by brokering diplomatic normalization between Iran and Saudi Arabia and expanding trade ties with Gulf countries. By claiming to stand up for the Palestinians, the Houthis aim to increase their standing in the Arab world. and some observers suggest that Beijing’s reluctance to confront the group is driven by a similarly cynical effort to enhance its regional clout. While the United States and its allies bear the burden and potential reputational costs of military intervention, China can posture as the champion of the global South. Other observers have gone further, suggesting that China tacitly approves of the Houthi attacks and is deliberately enabling them through its continued trade with Iran, the Houthis’ main backer, as part of a broader plan to foment chaos in the U.S.-led international order.
In fact, both of these interpretations miss Beijing’s deeper priorities in the region. Although China’s leaders are glad to avoid military entanglement—and to score easy diplomatic points with regional governments in doing so—they have no desire to see the Red Sea attacks continue. They know that their country has too many economic and military interests at stake. Rather than grow larger, they want the crisis to end—but without having to spend their own diplomatic, economic, or military resources to achieve that outcome. To expand its influence in the Middle East, China ultimately depends on stability, not chaos—a goal that holds important strategic implications for the United States as it tries to contain the war in Gaza.
At a time when China’s economic position looks increasingly uncertain, instability in the Middle East poses an outsize threat to its economic stability. Given the region’s importance to China’s international trade, Beijing has signaled that it wants to secure its supply chains to states in the region. In an interview with Al Jazeera in April, Chinese Foreign Minister Wang Yi called the Red Sea “a vital international shipping corridor for goods and energy” and stated that “safeguarding its peace and stability helps keep global supply chains unobstructed and ensures the international trade order.”
Indeed, the Houthi attacks on commercial vessels threaten China’s supply chains in the region. The campaign has forced many international shipping companies to redirect their vessels to the far longer route around South Africa’s Cape of Good Hope, adding days to normal shipping times and raising fuel costs by some 40 percent. Moreover, roughly 70 percent of China’s exports to the United States normally pass through the Red Sea, and this trade now incurs significantly higher shipping costs in addition to the long delays. For Beijing, the timing could not be worse. Facing sluggish domestic consumption and an imploding property sector, the Chinese government is seeking to boost growth through high-value exports such as cars, electric vehicle batteries, and solar panels. Shipping makes up a relatively high percentage of these products’ overall cost structure, leaving them particularly vulnerable to price shocks.
Disruptions to global trade could potentially jeopardize China’s energy and food security as well. For the moment, the country’s imports in these two strategic sectors are sufficiently diversified to make a major crisis unlikely, even if the Houthis manage to bring Red Sea shipping to a complete standstill. Bumper grain harvests in recent years and the increasing use of electric vehicles and domestically produced clean energy give China additional layers of protection against an energy crunch induced by supply chains. Nonetheless, foodstuffs and hydrocarbons are traded on global markets and therefore highly sensitive to turmoil wherever it occurs. Alongside the Red Sea crisis, Russia’s war in Ukraine has caused major disruptions to grain shipments through the Black Sea, and droughts and low water levels have limited all forms of trade through the Panama Canal. The longer the Houthi attacks continue, the more these pressure points will drive up food and energy prices worldwide, including in China.
The Red Sea crisis has exposed Beijing’s ambivalence about its military presence.
Beijing knows that a prolonged crisis could jeopardize its growing economic interests around the Red Sea. China holds significant stakes in port operations near the Suez Canal—20 percent at Port Said at the northern end and 25 percent at Ain Sokhna in the south—and has plans to invest in new port terminals on both coasts of the sea. Reduced shipping means reduced revenue for Chinese state-owned enterprises involved in port operations and for private Chinese firms moving cargo between China and Europe. Harm to Egypt’s economy, for which Suez Canal traffic has become a lifeline in recent years, is also bad news for China. Now Egypt’s fourth-largest creditor, Beijing has billions at stake in the country.
What is more, China has positioned itself as a key player in the Middle East’s clean energy transition, giving it a vested interest in the region’s own economic stability and supply chains. In June 2023, the Chinese electric vehicle producer Human Horizons signed a $5.6 billion deal with Saudi Arabia. And this spring, the United Arab Emirates (UAE) and China signed a new memorandum of understanding under Beijing’s Belt and Road Initiative to deepen their economic engagement, particularly on green technology.
The Red Sea crisis has also exposed Beijing’s ambivalence about its military presence in the region. Since 2008, China’s People’s Liberation Army Navy has stationed a fleet of in the sea, including a destroyer and frigate, to conduct antipiracy missions and buttress its status as a rising regional power. It also maintains its only overseas naval base in Djibouti, on the nearby Gulf of Aden. In theory, China could use its forces in the region to strike back at the Houthis or to escort commercial vessels into and out of the Red Sea. Yet China’s reluctance to protect its own commercial ships underscores its general aversion to military intervention—even in a case where it has a base close to the conflict and its own economic interests are at stake. The longer the attacks continue, the greater the risk that Beijing finds itself in a situation in which it is compelled to deploy its naval forces and become directly involved in the conflict. Paradoxically, given the priority it places on avoiding military entanglement, China’s naval assets in the region could prove a liability, if the Houthi campaign becomes prolonged.
Despite Beijing’s economic and military assets in the region, some in Washington have suggested that China’s leaders are profiting from the Red Sea predicament. In an essay published in Foreign Affairs in April, the former U.S. deputy national security adviser Matt Pottinger and the former U.S. congressman Mike Gallagher argued that Beijing’s inaction with respect to the Houthi attacks was part of Chinese President Xi Jinping’s “policy of fomenting global chaos.” According to this theory, China supposedly benefits from and seeks to fuel global crises that entangle the United States and thereby expose Washington’s weakness in managing the Western-led international order.
Yet this logic distorts China’s calculations. Indisputably, Beijing sees itself as a rising power, and Chinese leaders have made clear that they are dissatisfied with U.S. leadership of global affairs. And in the short term, China may derive some benefit from staying on the sidelines of controversial U.S. military interventions. But that does not mean it wants to encourage conflict around the world. This is especially true in the Middle East. Should the Red Sea crisis or the war in Gaza spiral into a wider war, this could further upend Chinese trade and investments across the region.
The theory that Beijing is deliberately sowing chaos misreads its understanding of its own rise. In recent years, China’s flagship research institutions and think tanks have published theories on the “general laws” governing the rise and fall of great powers. According to these models, the world has passed through a series of great power “cycles” over the last half millennium or so, including those of the Spanish and Portuguese in the sixteenth century, the Dutch in the seventeenth and eighteenth centuries, and the British in the nineteenth and early twentieth centuries. Each of these, in the Chinese view, lasted for roughly 100 years and ended in disorder and upheaval, and the hegemony of the United States established after World War II is continuing this trend. In a 2021 essay, Wang Honggang, a scholar at the China Institutes of Contemporary International Relations in Beijing, characterized the terminal stage of this cycle as “world crisis,” a decades-long period of destruction and fierce competition between states.
Xi has made clear that he subscribes to this theory. Since 2018, he has spoken constantly of “changes unseen in a century,” an apparent allusion to upheaval and innovation related to the erosion of American power, from the 2008 global financial crisis and ongoing populist backlash against liberal democracy to the rapid recent advances in biotechnology and artificial intelligence. China’s top officials and academics hope and may sincerely believe that these changes will enable their country to gain dominance in the post-American cycle. But they are also keenly aware of the challenges that Beijing must address to survive the tumult. Xi has mobilized the Chinese Communist Party’s propaganda apparatus to promote “calamity consciousness”—a calm yet vigilant readiness to seize opportunities arising from disaster—and ensure that party officials are prepared for the “major risks and challenges” lying ahead.
Chinese leaders will continue to score easy diplomatic points where they can.
As a result, Beijing has sought to minimize its exposure to global instability and maximize its ability to survive and adapt. At the level of grand strategy, this means diversifying supply chains and trade routes to provide ways around local or regional conflicts or to limit the impact of potential economic sanctions. As the geopolitical analyst Parag Khanna argued recently, Houthi attacks on Red Sea shipping are a textbook example of precisely the sort of risk that Beijing’s Belt and Road Initiative aims to mitigate: by building more and more diverse supply chains, China can better insulate itself from any given supply shock, whether caused by geopolitical events or climate change. The country is also promoting overland trade routes, such as a rail corridor through Central Asia to Europe, that can serve as backstops to disruptions along major shipping routes. In a similar vein, Beijing has labored over the past decade to offset its reliance on American corn, wheat, and beef by expanding its commodities trade with Argentina, Brazil, and other Latin American countries, as well as Asia.
These strategies are readily apparent in Beijing’s Middle East diplomacy. In 2021, China entered into a valuable energy and economic partnership with Iran, another vocal critic of the Western-dominated system. It also established and upgraded “strategic partnerships” with U.S. partners in the region, including the UAE in 2012 and Saudi Arabia in 2022, and continues to bolster its influence over Arab states through the China-Arab States Cooperation Forum. Beyond extending its diplomatic sway—as shown by its mediation of the Iranian-Saudi rapprochement in March 2023—Beijing sees these agreements as a means to secure reliable access to energy and build infrastructure.
For the moment, the Houthis are showing no signs of relaxing their stranglehold on the Red Sea. Testifying before a Senate committee in early May, the U.S. director of national intelligence, Avril Haines, predicted that the threat of attack was “going to remain active for some time.” The international shipping company Maersk expects the shipping disruptions to continue through 2024 and has reported that “the risk zone has expanded, and attacks are reaching further offshore.” Indeed, in a round of attacks the first week of June, Houthi rockets and drones struck several commercial ships, and the group also launched an attack on a U.S. aircraft carrier, although U.S. officials maintain that it was unsuccessful.
Although such strikes also threaten Chinese interests in the region, Beijing’s options are limited. It knows that any military response it might undertake would be no more successful than those of the United States and the United Kingdom. It also needs to maintain the support of Middle East leaders in its bid to fill gaps left by the West across the region. As a result, China is likely to respond with more of the same, doing what it can to safeguard its own interests, avoid further entanglements, and withstand future disturbances.
In line with their view that American power is declining, Chinese leaders will continue to score easy diplomatic points in the Middle East where they can. Thus, in April, they invited members of the rival Palestinian organizations Hamas and Fatah to Beijing to foster reconciliation and to outline a possible unity government for postwar Gaza and the West Bank—however remote such a plan may be at present. As polling conducted by Michael Robbins, Amaney Jamal, and Mark Tessler in late 2023 and early 2024 indicates, Arab citizens’ opinion of China has improved since October 7, although few respondents agreed that China was seriously committed to safeguarding the rights of Palestinians.
Ultimately, China seeks in the Middle East what it is seeking elsewhere: to expand its trade ties, diversify its sources of energy and food imports, and assert its growing influence as a great power, all while avoiding military entanglements. Chinese leaders recognize that rhetorical opposition to Western dominance in the region is a low-cost way of soliciting broader support, especially in the global South. Their greatest priority is not to sow more instability but to guard China’s interests and adapt to a threatening geopolitical environment. To accomplish that, they may employ cynical and opportunistic methods, but these are based on managing, not creating, crises.
For the United States, this means that China will remain a diplomatic competitor in the Middle East. Washington should expect Beijing to continue to decry American hegemony and cast itself as a more benign and constructive great power. But contentious rhetoric should not deter U.S. policymakers from recognizing that China’s real interests lie in staying out of conflict and extracting what gains it can, leaving the responsibility of restoring regional stability to other countries. China won’t be willing to lay much on the line for peace, but it won’t stymie the process, either.