Strains between China and the U.S. worsened in 2018 to levels unseen in years.
U.S. President Trump has accused Beijing of infractions ranging from the alleged theft of intellectual property to forced technology transfer. But trade seems to be among the president’s biggest concerns, and he targeted the $376 billion (U.S.) U.S. trade deficit with China as a challenge that urgently needed to be addressed.
The president imposed tariffs on Chinese imports, first targeting $50 billion in goods, then $200 billion more. On the second set, Mr. Trump initially affixed a 10% rate, but said he would boost it to 25% on Jan. 1 should China not meet some of the U.S. demands.
If talks with Beijing fail, the president said he would put tariffs on the rest of the more than $500 billion in items the U.S. imports from China each year. That provided incentive for China to negotiate. The two sides have until March to find a solution, without which the U.S. says it would pursue more punitive measures.
The trade strife comes amid frictions elsewhere. U.S. warships routinely patrol the South China Sea to challenge Beijing’s claims to disputed territory. Washington is alleging Chinese cyberattacks, while taking steps to curb the growing market share of Chinese telecom giant Huawei Technologies Co. over concerns its equipment, found on networks around the world, could be used for espionage.
Moreover, the U.S. plans to counter Beijing’s investments and infrastructure loans to governments that aim to expand its influence globally.
Each side accuses the other of aggression, but the Trump administration says it has done more than its predecessors to confront China. “Previous administrations all but ignored China’s actions, and in many cases, they abetted them,” said Vice President Mike Pence in a recent speech. “But those days are over.” Jathon Sapsford Killing of a Writer Jars U.S.-Saudi Relations The killing of Jamal Khashoggi, a onetime royal insider turned government critic, provoked a global backlash against Saudi Arabia, straining the kingdom’s U.S. ties and casting a shadow over an effort to remake its oil-dependent economy.
Mr. Khashoggi was brutally killed in October inside Saudi Arabia’s consulate in Istanbul by operatives dispatched from Riyadh.
The killing suggested that, despite moves toward liberalizing Saudi society, a deep gulf in values remains between the kingdom and the West. It prompted investors to pull out of Riyadh’s premier investment conference and precipitated the biggest crisis in the U.S.-Saudi relationship since the Sept. 11, 2001, attacks.
The Central Intelligence Agency concluded that Crown Prince Mohammed bin Salman must have ordered Mr. Khashoggi’s killing, pointing to messages the young royal exchanged with a close adviser who is suspected of having led the operation. The Saudi government has denied Prince Mohammed was involved in the killing.
The U.S. Treasury has sanctioned 17 Saudi officials over the death.
Prince Mohammed, the kingdom’s de facto ruler, has been behind some of the monarchy’s boldest moves in recent years, from overhauling the economy to finally allowing women to drive. But he also led a ruthless crackdown against perceived dissenters.
The Trump administration, while condemning the killing, has defended the alliance with Saudi Arabia, saying it is central to a Middle East policy focused on countering rival Iran, brokering an end to the Palestinian-Israeli crisis and fighting religious extremism.
However, bipartisan opposition to the kingdom in Congress is growing—and isn’t limited to Mr. Khashoggi’s killing. Lawmakers also point to Saudi Arabia’s conduct of the war in Yemen, its spat with neighboring Qatar and its imprisonment of women’s-rights activists. The pressure isn’t likely to let up. Margherita Stancati North Korea Diplomacy Moves Forward, Then Cools President Trump and North Korean leader Kim Jong Un launched a diplomatic offensive in January that led to a flowering of talks with South Korea and the U.S. in 2018.
After trading threats with the new U.S. president, Mr. Kim took advantage of South Korea’s hosting of the Winter Olympics to send a large delegation to the South, led by his younger sister. The Olympic Games paved the way in April for the first inter-Korean summit since 2007.
A surprise second summit between Mr. Kim and South Korean President Moon Jae-in served as prelude to the dramatic meeting between Mr. Kim and President Trump on June 12 in Singapore, the first ever between a North Korean leader and a sitting U.S. president.
That summit was perhaps most noteworthy for Mr. Trump’s seemingly off-the-cuff decision to scrap U.S.-South Korean military exercises, answering a longstanding North Korean demand.
The diplomatic process has since sputtered, though, amid suspicions about Pyongyang’s continued nuclear weapons development and Washington’s unwillingness to lift sanctions.
Two scheduled high-level meetings were abruptly scrapped, and follow-up plans for Mr. Kim to meet with Messrs. Trump and Moon have been pushed into 2019. Jonathan Cheng U.S. Jockeys With an Unquiet Iran Iranian leaders faced down some of the biggest street protests in years but struggled to shield the economy from the Trump administration’s sanctions, heightening pressure on the government to contain simmering public discontent.
The year began with a security crackdown on street protests—the largest in Iran in almost a decade. With inflation approaching 30% and unemployment at 12%, Iranians poured into the streets in hundreds of cities to express anger at the government’s failure to improve living standards. The demonstrations evolved into a broader rebuke of the ruling system. Chants from crowds against Supreme Leader Ayatollah Ali Khamenei were rare for a country that doesn’t tolerate insults against its most powerful figure.
Tremors of unrest continued through the year, with women protesting Iran’s restrictive public dress code by filming themselves without headscarves, and workers in southwestern Iran striking over unpaid wages. Merchants in Tehran’s Grand Bazaar shuttered their shops as the Iranian currency plunged in value against the dollar.
President Trump in May withdrew the U.S. from an Obama-era nuclear deal that had given Iran sanctions relief in exchange for limits on its nuclear program. New rounds of sanctions in August and November, imposed as part of the Trump administration’s bid to contain Iran and prevent it from being a threat to Israel, have hit its major industries, central bank and trade in oil.
Meantime, Iran’s military remained actively involved in Syria’s conflict, supporting President Bashar al-Assad as the tables turned increasingly in his favor.
Attempting to defy the sanctions, Iran’s leaders shored up the social safety net and arrested hundreds of people suspected of corruptly profiting from the country’s distress. The question next year will be whether the moves insulate it from U.S. pressure or ratchet up popular anger against the regime. Asa Fitch The Year of the Trump Trade Rules For President Trump, 2018 was the year in which he made a down payment on his campaign promise to rewrite trade agreements. The efforts to revise existing pacts, and strike new ones, came as his administration imposed big tariffs on imports from China and on steel and aluminum from around the world.
First, Mr. Trump amended a trade agreement with South Korea enacted during the Obama administration. About the same time he imposed global tariffs on steel and aluminum, part of an effort to address a glut of Chinese production of those metals. The steel duties and the threat of possible new tariffs on cars helped bring the European Union to the table to discuss, starting next year, a pact to lower tariffs on industrial goods.
The Trump administration also finished its overhaul of the North American Free Trade Agreement, which the president long derided as unfair. Under the new version, signed in November, a great portion of cars must be manufactured within the three-nation block—by laborers paid high wages—to qualify for reduced tariffs.
Next year, the administration must horse-trade with Congress, including the Democratic-controlled House, to get the pact ratified.
On other fronts, the president is set to negotiate a possible trade deal with Tokyo after earlier pulling out of an unratified pact that included Japan, the Trans-Pacific Partnership. Jathon Sapsford Future of Brexit: Never More Murky With three months to go before Britain is scheduled to leave the European Union, nobody knows under what terms it will happen. In fact, the uncertainty is so extreme that there now is a chance that Brexit may not happen at all.
The agreement Prime Minister Theresa May negotiated with the EU in November, ending two years of talks, remains unratified by the British Parliament. While she survived a no-confidence vote this month by Conservative Party lawmakers seeking to oust their leader, her narrow margin of victory made it clear her Brexit plan—widely opposed by opposition parties—faces significant resistance within her own.
Mrs. May is seeking more concessions from the EU, but European leaders have shown little willingness to reopen an agreement that has the support of all 27 other EU members.
Unless she changes course, the next high drama will come in January, when Mrs. May must finally put her plan for parliamentary vote. Her best chance to pass her plan is to scare lawmakers by laying out what she will describe as the dire alternatives: an economically damaging no-deal exit on March 29, or a second referendum on the issue.
Lawmakers say there is no majority in the House of Commons for a no-deal exit. But, unless the government changes course, that is the default possibility.
There are hopes among lawmakers that she pivots to a less radical break with the EU—but that may not be negotiable until after the U.K. leaves. The whole question could go down to the wire on March 29 or even beyond, if political chaos in Britain forces the government to ask for a Brexit delay while the country’s politicians sort themselves out. Stephen Fidler Voters Target the Establishment It was another good year for political insurgents in many democracies, and another bad one for traditional incumbents.
The antiestablishment mood that displayed itself in 2016 with Donald Trump’s election as U.S. president and the U.K.’s referendum vote to leave the European Union continued to shake up the political order on both sides of the Atlantic in 2018. In Europe and Latin America, voters backed political outsiders against long-dominant governing parties seen as unresponsive, self-serving or corrupt.
The roots of the voter backlash include economic stagnation, fears over immigration and frustration about lawlessness. The political rebels profiting from the discontent ranged from far left to far right, yet many riffed on a common theme: the failure, they claimed, of elites in governing institutions and the media to serve the common people.
Outsiders won presidential elections in Latin America’s two most populous countries, Brazil and Mexico, where voters tired of corruption and rampant violent crime punished parties that have dominated power for three decades. Veteran left-winger Andrés Manuel López Obradorswept Mexico’s elections in July, mobilizing millions who feel left behind economically but raising anxiety among business about the country’s openness to foreign investment. Veteran right-winger Jair Bolsonaro triumphed in Brazil in October, riding a conservative revival in Brazil’s culture wars but stirring liberal fears about a return of authoritarianism.
In Europe’s most important election of 2018, Italian voters in March dealt a crushing defeated to the mainstream center-left and center-right parties that have alternated in power for a quarter-century. The country’s new masters are the anti-immigration League, led by the fiery Matteo Salvini, and the 5 Star Movement, which began as a grass-roots campaign against political corruption.
Popular discontent in France also threatened Emmanuel Macron’s presidency and his economic overhaul, forcing him to delay a fuel-tax increase and provide relief to low-income households in response to the leaderless “Yellow Vest” protest movement.
In France, Emmanuel Macron, an insurgent only a year before, faced the biggest threat to his presidency in the leaderless “Yellow Vest” protesters, a movement born out of anger over a fuel-tax increase.
Elsewhere in Europe, the far right made election gains inSweden while Germany’s Greens surged in regional elections. Mainstream parties that have dominated Germany since World War II took a beating, including Chancellor Angela Merkel’s center-right, weakening Europe’s most powerful leader. In response, the chancellor said she would step down as head of her party. Marcus Walker Relations With Russia Grow Colder The rocky relationship between the West and Russia only grew more acrimonious, as the U.S. and European allies tightened their vise of sanctions over the Russian economy and sought to build up military assets in Eastern Europe.
The poisoning of a former Russian spy on British soil with a military-grade nerve agent in March prompted the U.K. and its allies to expel Russian diplomats and impose more economic and financial sanctions on companies and oligarchs linked to Russian President Vladimir Putin.
The Helsinki summit between Presidents Trump and Putin in July offered to bring a thaw in relations. But the meeting failed to lead to any rapprochement, as U.S. lawmakers slammed the president for suggesting he believed Mr. Putin’s denial that Moscow interfered in the 2016 U.S. elections and his refusal to condemn the Russian president.
Tensions ratcheted up further after the Russian Navy seized three Ukrainian naval ships in November. Kiev declared martial law, and the U.S. sent a warship into the Black Sea and carried out a flight over Ukraine.
Citing the incident, Mr. Trump scrapped a G-20 meeting with Mr. Putin. The U.S. then issued a 60-day ultimatum to Moscow to come into compliance with a Cold War-era arms treaty or it would pull out. Mr. Putin, showing no willingness to alter Russia’s missile program, warned in response of an arms race. Matthew Walls In Brief
An opposition coalition led by former Prime Minister Mahathir Mohamad swept to power, ending one-party rule in Malaysia and kicking off a n expansive corruption probe that ensnared the country’s ex-leader over his alleged role in siphoning billions out of the sovereign wealth fund 1MDB.
A 7.5 magnitude earthquake and ensuing tsunami devastated a handful of coastal cities on the Indonesian island of Sulawesi, killing more than 2,100 in a natural disaster that turned the ground into a moving slurry and swallowed whole buildings and homes.
Pope Francis and Beijing reached a historic and controversial agreement in which China’s Communist leaders for the first time officially recognized the Catholic Church, and, in exchange, the Vatican gave Beijing a say in how it appoints bishops in the country.
Turkish President Recep Tayyip Erdogan came to an uneasy truce with President Trump after the NATO ally released detained American pastor Andrew Brunson, a move that eased a selloff on Turkish markets but left unresolved disagreements over Syria and an extradition request for a Turkish cleric living in the U.S.
Fighting a currency crisis and soaring inflation, President Mauricio Macri sought out a $57.1 billion lifeline from the IMF and is rolling out unpopular austerity measures.
The U.S. moved its embassy in Israel to Jerusalem, handing a victory to Prime Minister Benjamin Netanyahu and his right-wing coalition but infuriating Palestinians, who have refused to engage in the Trump administration’s peace process.
Beijing massively expanded an internment program for Islamic extremists, forcing as many as a million Muslim Uighurs in the Xinjiang region into “re-education camps.”—a scale unseen since the Mao era.
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