In this week’s episode of China Insider, Miles Yu breaks down Beijing’s Arctic strategy and regional ambitions, and he relates how this affects America’s security interests in Greenland. Second, he covers the recent trade agreement between the United States and Taiwan and the deal’s impact on semiconductors and artificial intelligence. Finally, Miles reviews Prime Minister Mark Carney’s state visit to Beijing last week and the outcomes, including the preliminary trade deal and economic cooperation framework.
China Insider is a weekly podcast project from Hudson Institute’s China Center, hosted by China Center Director and Senior Fellow, Dr. Miles Yu, who provides weekly news that mainstream American outlets often miss, as well as in-depth commentary and analysis on the China challenge and the free world’s future.
Episode Transcript
This transcription is automatically generated and edited lightly for accuracy. Please excuse any errors.
Miles Yu:
Welcome to China Insider, a podcast from the Hudson Institute's China Center. I am Miles Yu, senior fellow and director of the China Center. Join me each week for our analysis of the major events concerning China, China threat and their implications to the US and beyond.
Colin Tessier-Kay:
Welcome back everyone to China Insider. We have three topics for you this week. First, we discussed China's Arctic strategy and regional ambition, despite the geographic and consistency and how this relates to US security interests in both Greenland and the Arctic at large. Second, we cover the recent trade agreement between the US and Taiwan following months of negotiations, the terms involved and the significance of this deal for the semiconductor and AI sectors. Finally, we report on Prime Minister Mark Carney's state visit to Beijing last week and highlight some of the outcomes including the preliminary trade deal framework. Miles, great to be with you again this week.
Miles Yu:
Nice to be with you again, Colin.
Colin Tessier-Kay:
So up first today we head to the Arctic where over the last couple of decades, China has steadily reworked its policy and regionally ambitions to increase both presence and use of Arctic channels and resources. This all initially started with scientific diplomacy and climate interests, but China has now shown significant interest in international lawmaking and arctic politics, noting an expansion of interest. So including some of this includes alternative trade routes for its belt and road initiative projects to avoid strategic choke points, namely the Malacca Strait. But concurrently we've seen an increased priority in US security interests in the Arctic region under the Trump administration to mirror some of this increasing influence. So with the latest focus landing on Greenland to reportedly counter this influence Miles, what exactly is China's arctic policy and ambition now and how does this impact the ongoing US China strategic competition dynamic?
Miles Yu:
Right, Colin, the fact is undeniable - that is the biggest epic battle for dominance for competition of model of governance is now between two countries, United States and China, both in terms of their respective intentions, capabilities, and opportunities. So China is playing the global game. So does the United States. Those are only two countries that are capable of doing this right now. So China has this grand strategy and it's a different understanding of global geopolitics and geographies. That is China believe there are traditional domains where either China dominates or United States dominates, but there is also a huge chunk of areas in the world. Nobody could claim dominance. Nobody could claim dominance. The Arctic is far more important because the global trade, global economy, global military centers in northern hemisphere rather than the south.
So China has adopted a policy of, in certain itself as the preeminent power in the Arctic region. And this ambition was clearly declared in January 2018 when China published the first ever Arctic white paper in the Arctic white paper. China doesn't mean word, it says by 2030 China will become a major arctic power, not their words. And the way China is framing this is China unilaterally and rather bizarrely categorize itself as so-called near Arctic country. That is China is a 1400 kilometers away from the Arctic circle. China claimed it's a near Arctic country, and if this logic will prevail, Saudi Arabia would do the same. So this is basically ridiculous. Secretary of state, Mike Pompeo at the time went to the Arctic Council. Strenuously objected China's self-declaration in which he said, there's only two categories, either your Arctic country or non-art country. There's no such thing called near Arctic country.
So how does China establish its arctic dominance? Well, basically is not through outright and military penetration or security presence. China basically has tried very hard since then to establish economic foothold through bear road, through investment. And when that failed, most notably, China attempt to buy over a hundred square miles of land in the small arctic country of Iceland will not fail. China basically use so-called research, scientific research, climate focused research projects as a roof to penetrate over there. So China has a lot of research stations in the Arctic region right now, and there's one permanent station inside Iceland. So all this is just to present the Chinese presence there now and for a letter dominance once the president is normalized and later on control and dominance through investment, through technological dependency, through trade, and all become very normal. So this is a long-term plan and the US pushback is basically precisely against China's attempt to control Arctic region, particularly Greenland.
And this has become very urgent in recent years for two regions. Number one, China and Russia have become very close. Now Russia is a legitimate arctic country. So by aligning with Russia, China can easily bypass the Russian geographic death and launch intercontinental b brisker missiles, which China's primary nuclear deterrence against the United States East coast. We're talking about Boston, New York, Washington DC this whole area because Chinese business have to fly through the Arctic region, particularly over Greenland. This is one major argument of Donald Trump's attempt to acquire Greenland as a part of the Americans homeland defense. It's not about Americans colonialism. So it's about Americans homeland defense. This is the argument. And China is there. Another way to exert control in recent years is through massive economic investment Belt and Road Initiatives. China wants to build something called polar silk road. This is their frame and to gain access, presence and norms. So this is a reason why Greenland is strategically priceless because of its geography, the basin rights and sea routes. United States has now one small radar tracking base in Greenland. That is to track the incoming missiles through the United States, continental areas, east coast in particular, and to provide a priceless and imperative early warning. So this is a very essential part of the Americans nuclear counterstrike strategy. That's why Greenland arctic is very important. It's all about China.
Colin Tessier-Kay:
Yeah. And China's as a near arctic, however you want to coin that term, its role in that kind of regional sphere is rather significant because Arctic politics has long involved several key players that have rarely seen eye to eye, namely Russia and the us, but with territory in the region. We also include Canada, Norway, the Scandinavian countries like you mentioned, Iceland and Denmark all have played a role in international forums governing the region and have secured many protections over the years. But now with China, a non-arctic state entering the fold, there has been a shifting focus, at least from the US perspective to Greenland as you mentioned, which stands to shift the current Arctic political dynamic. And with China seeking a larger presence in the region and now having forged frameworks for enhanced bilateral relations with at least one of those countries in Canada just last week and existing relations with Russia now also on the table Miles, where does the future of arctic politics go from here with China in the fold and beyond Greenland? Where should the US focus be in responding to counter China and the region?
Miles Yu:
Funny thing that you bring up Canada, because Canada was a country most allergic to Russians, Arctic strategy, Russia has been a country that has militarized Arctic region. Putin, about 10 years ago, established something called the Arctic Brigade. He basically reasserted the Russians - the military presence and dominance in regions that used to be controlled by the Soviet Union in the Arctic region. Canada reacted very, very violently to that because Canada and Russia share a very large chunk of the Arctic region and both have overlapping claims. So Canada, Canada is a small country, but one of its largest military exercises took place normally in the winter, in Arctic region to showcase Canada's resolve to push back Russia. Now the Russia's military gambit in Arctic region is particularly relevant here in relation with China. China has no legitimate reason whatsoever to extort it, the military presence in Arctic region. Now it has because Russia and China have and will expand joint military exercise drills in Arctic region. And that's the problem that China's economy is ten times larger than Russia's. It has the economic, financial and technological wherewith withdrawal to basically use Russia as a conduit, a gateway to the Arctic region completely dominant in the near future. So that's where the problem is. I hope Canada and other six Arctic council members will join hands together to stop this penetration of Arctic region by Maan powers led by China and added by Russia.
Colin Tessier-Kay:
Turning to our next topic today, the US and Taiwan have reached an agreement on trade and tariffs following a months’ long negotiation. The terms are many, but chiefly include securing commitments to invest. I believe it's $250 billion in semiconductor and technology manufacturing in the US in exchange for lower tariffs on imports from Taiwan. This is certainly a major step in the restoration of the US semiconductor manufacturing leadership. So Miles, walk us through the trade negotiation process here. What should we know about the agreed upon terms and what will the investment in US manufacturing look like in the coming years?
Miles Yu:
Well, this is really not just a trade deal, it is a supply chain security deal between United States and China by such a deal. The United States and Taiwan were further integrated economically, technologically, and this kind of economic and technological integration is a very best way for security integration. So you can bypass a lot of diplomatic political hurdles by securing Taiwan and the US Defense Alliance. So this is very key. And I think you mentioned about $250 billion in support for US-based build out. That's one thing. But also there's another $20-50 billion pledge by this trade deal that basically says that Taiwanese government will provide another $20-50 billion fund to encourage medium and small and medium sized Taiwanese chip making industry, particularly semiconductor industries to build foundries factories in the United States. In other words, government funded, government facilitated credit for the Taiwanese firms to build in the United States.
Those are basically the win-win situation I think for Taiwanese is also a gigantic diplomatic victory because for the first time ever, the United States treat Taiwan as an equal partner on par with any other country. So it's not just a economic entity, it's also a political entity. Taiwan signed a bilateral trade deal with a country. You can only do that with a sovereign entity. So that's one reason why people in Taiwan is very, very joyful about this. And I think the chief negotiator is the sort of vice president of the legislative UN is a woman by the name of Journal un. She became a superstar overnight. Everybody loved her off. So this is very, very important because the most important thing is also the tar rate. The tar rate initially up to this point for Taiwan was 20%. That was considered high. Actually it's kind of low, but it is not considered high because Taiwan has a much higher expectation of being treated as a country on par with say Japan and South Korea, which enjoy 15% rate.
Now the new tariff deal give Taiwan 15% rate and the lowest possible in the countries of its own category. And this is a very, very important, and not only this, the process of negotiation between US representatives basically led by Scott Bessent and Howard Lutnik and also Jameson Greer, and the Taiwanese delegation is very amicable and it's very smooth and it's a reason rationality and basically it is a mutual persuasion. So there's no harsh word, there are no threat whatsoever. So this is why it's very, very important this there's a further smash, the prevailing Chinese propaganda inside China and inside Taiwan that somehow United States resolved to help and defend Taiwan is questionable. There's no question about that now.
Colin Tessier-Kay:
So as we know, Taiwan's economy and frankly political and national security depend on its semiconductor industry. And one of the motivating factors in the tariffs initially toward Taiwan as a little bit of backdrop was to address concerns in the trade deficit of which roughly 90% involved semiconductor chips and electronic goods. So we have reached a resolution at least on that front to an extent, but there are still some concerns, at least for the domestic reception of the trade deal among the Taiwanese population and whether this deal may or may not compromise the domestic industry and weaken Taiwan's international appeal. So to address these concerns, miles, how has the trade deal been received thus far in Taiwan and does the ruling DPP party face any kind of domestic obstacles in selling this to the rather partisan legislative yuan or Taiwanese people?
Miles Yu:
No, I mean this is so important. It is a diplomatic and economic triumph on part of the DPP, the incumbent. But Taiwan is a democracy. Democracy always has oppositions, right? So the rule of democracy is every time the incumbent wins, the opposition dies a little. This is also true in Taiwan. So the KMT, the leading opposition party will say this is a bad deal, this is for Taiwan. But there's no hard evidence. You think about how not only this deal is numerically and technically gigantic, you talk about some of the ramifications, some of the downstream deals. It's also a very big deal. Also, for example, the US Taiwan trade deal, it's a economic interdependency deal without a former free trade agreement, FTA, that's a very big deal. And also if you talk about the whole sort of double class sword hanging over a lot of countries heads, this is so-called the sectorial tars, the Section 2.3.2.
Now in this US Taiwan deal, it says all the Taiwanese firms may be rewarded or credit for building in the US is a template for tariffs with carve outs, for on insuring. In other words, yes, you might have section 2.3.2 problem, but as long as you build in the United States your own factories and then you're okay. So this actually a very good way, very clever way. It's a win-win situation for both sides. So I think I don't say KMT, the leading opposition could be persuasive in any possible way over this deal. And plus this is the US government signing a deal with Taiwanese government. If the KMT played their usual political games in the legendary that will pit United States government against the KMT party, and because this is obviously is a hard or earned result beneficial to both Taiwan and United States.
Colin Tessier-Kay:
Yeah, it'll be interesting to see how the domestic manufacturing process for the US side now develops over the next couple of years with this massive investment and the bilateral relationship, at least going forward now that there's a substantial framework. But speaking of trade deals, we close our discussion today with our final topic involving some high level diplomacy As Prime Minister Mark Carney's state visit to China has concluded producing some interesting and noteworthy outcomes. The biggest headline perhaps following the visit has been the announcement of a tariff reduction deal on some Chinese electric vehicles and Canadian canola products. A trade dispute that has been ongoing since 2024 and has caused quite the rift in domestic Canadian affairs. At least some quick numbers for you here, at least as far as we've been able to tell from the terms of the deal, Canada will permit the import of roughly 49,000 Chinese EVs at a 6.1% tariff, which is all the way down from a hundred percent in exchange for removing the 100% tariff on canola meal and reduced tariffs on imported canola seed to 15% from China's side. But beyond the preliminary deal here, miles, can you walk us through what unfolded with Kearney state visit? Who did he meet with and what else should we know about the meetings and the outcomes here?
Miles Yu:
One of the most idiotic deals I've ever seen our good labor Canadians have done, I mean premise of Kearney is deluding himself. The Chinese EVs are not just EVs from a security point of view, Chinese EVs is computer network that linked to China. So that's one of the reasons, one of the major reasons why United States is pretty much literally prohibiting Chinese EVs from running around on the street of United States. So this is a major security problem. Now, premises Kearney is a guy just over a year ago saying China was the biggest national security threat to Canada. Now it goes to China hobnobbing with the head of that regime, which is supposed to be the biggest threat to Canadian security and for what? For 49,000 Chinese EVs running around Canadian streets. And if that's the case, it's going to seriously jeopardize the intelligence sharing between United States and Canada. Canada maybe kick out of the five I Alliance. So this is a very, very bad thing. And also Kearney has got promise from the Chinese to buy a lot of canola relief. Anybody Canola Oil Canada produce a lot of them, but a very small number of people actually were into the canola business. So I think Kearney paved to the business interest. Now, anybody who grew up in China, canola, Tayo is a very big deal. Everybody cook with this kind of stuff and large, there's two kinds of oil in every Chinese kitchen.
And I think his larger frame is that Canada wants to have a strategic economy from the United States. This just idiotic Canadian economy is critically dependent on the US economy and United States and Canada may have some problems here and there, but this kind of passive aggressive, cranky policy to court your enemy as your alternative to your neighbor down south is not really as very smart way to do so. I think he made trading one vulnerability for another. The deal has already turned the Canadians apart. The governor, what do we call the governor? The head of the government of Ontario province is already say this is a total betrayal of Canadian injuries because the car industry centered in Ontario when the prime minister of Canada introduced Chinese EV cheap cars and they're going to destroy the Canadian automobile industry particularly is a part manufacturing industry. So this is very bad deal. I think once again, it proved that the Canadian Prime Minister is, I don't want use Trump's word, but he's not a very smart guy.
Colin Tessier-Kay:
Yeah, there's going to be a bit of a domestic dispute, at least on the Canadian affairs side because of what you just mentioned. There was quite the rift between the Ontario based automakers as far as keeping the tariffs existing, tariffs on EV vehicles or electric vehicles, and then the Saskatchewan agricultural sector, which was the primary source of Canada's canola products, which was getting hit by the reciprocal tariffs. So it's a bit of a balancing act there domestically and leading into the meetings, Canada State office indicated that a priority of the new Kearney administration would be this effort to increase economic diversification and that they would not hesitate to meet with leading economic powers to secure a more diversified portfolio. So this also includes the likes of India. I think Kearney has a visit coming up to India to meet with Modi and some of the officials there. There's been efforts to increase Canadian bilateral trade with the European Union and even other Indo-Pacific nations. But the planned deal with China and renewal of bilateral relations more largely certainly has a much more far reaching impact than the other potential agreements here down the line. So Miles, what does all of this mean for Canada's China policy and what is the significance of renewed Canada China relations to US interests
Miles Yu:
Throughout history, there are two very famous Canadians. The most famous Canadian in China is a doctor. He's a communist. He went to China in 1938 and his name is Dr. Norman Bethune, who was the guy who invented this since called the Mobile Army Surgical Hospital. That's M.A.S.H., like the TV show. So Bethune died in China. Mao Zedong wrote a very famous eulogy to memorialize comrade Bethune. So you go to China, there's a Bethune Hospital, there's a lot of monuments of him. He's a communist. So another one is Carney. Carney now is very famous in China. He's very infamous outside of China. So because of this, and I think it's going to be very, very interesting, I was particularly taken aback by Carney’s, sort of a near racist remarks the other day, he tweeted and made a statement as a matter of fact, that there are millions of Chinese-Canadians.
And so it is a very good deal to make a deal with the Chinese communist government and Canada so that all the Chinese-Canadians would have a better way to communicate connected between Canada and their homeland China. He still treated those Chinese-Canadians as foreigners, as somebody who treasures their homeland. Then to Canada and a huge number of these people in Canada from China are anti-communist, a lot of them fled and came to Canada before 1997 from Hong Kong because China was going to take over Hong Kong in 1997. So you go to Vancouver, Canadian-Chinese-American community is predominantly anti-communist. So anti PRC, if you look at the reaction from the dissonance from the community leaders in Canada, I mean there are criticisms and attacks on Canadians. It’s a stupid move and is really an avalanche. So I mean, that's why I take this particularly sort of a personal in this regard.
Colin Tessier-Kay:
Well, that's all the time we have for this week. Thank you to our listeners for joining us for another great conversation. And thank you Miles as always for lending us your time and expert insight on these issues. Looking forward to next week's conversation.
Miles Yu:
Alright, have a good week and you'll see you next week.