The Trump-Xi Summit
Security concerns, in the form of the North Korea situation, will no doubt occupy center stage. But we can expect trade and economic issues to have their place on the agenda as well.
The president tweeted recently that he expects the meeting with Xi to be a difficult one.
The meeting next week with China will be a very difficult one in that we can no longer have massive trade deficits…
— Donald J. Trump (@realDonaldTrump) March 30, 2017
Why so difficult?
Let’s recall that on the campaign trail, Trump turned the heat up on China–“We can’t continue to allow China to rape our country,” he once said–accusing China of depressing the value of its currency and threatening to label China a currency manipulator “on day one.” Day one has come and has long since gone and Trump has yet to make a move on currency manipulation. He has withdrawn the US from the Trans-Pacific Partnership–arguably to the benefit of China–and has ordered studies done on trade deficits and abusive trade practices that will take months to complete and to unknown effect.
Another incident may prove instructive to Beijing. In December, Trump spoke with President Tsai Ing-wen of Taiwan and questioned whether the US should be bound by the longstanding One China Policy. But in a phone call with Xi on February 10, Trump reaffirmed the One China policy.
The two leaders come to the summit with wildly different perspectives on the US-China economic relationship. Xi wants to stay the course, and try to get away with providing vague assurances of continued US-China cooperation.
Trump, if he’s on his game, will try to get Xi to understand that US-China trade no longer works for American businesses and workers. When China joined the World Trade Organization, it was understood that Chinese exports to the US would increase. But it was also assumed that over time a more affluent Chinese population would be buying more US exports. Instead, the Chinese government has responded with policies that encourage its people to buy domestically, yielding a bilateral trade deficit that stood at $347 billion in 2016..
But for Trump to claim a breakthough on trade with China he’s going to have to press Xi with some pretty specific asks, perhaps even threatening a trade war if China does not engage on these issues. Xi wants to avoid a trade war and want to get Trump to admit to that at the outset of his administration.
It’s possible that Xi has some goodies in his back pocket to offer Trump. Rumor has it that he will promise $50 billion in investment deals. But if Trump jumps at that bait because of his love of deals he will be neglecting the broader economic and trade issues that plague the bilateral relationship.
Trump may attempt a big show show at confrontation, bait that Xi is unlikely to bite at. Experts say that Beijing has not forgotten the lesson of Trump’s flirtation with Taiwan. Evan Medeiros, an Asia expert at the Eurasia Group, said that “many in China believe Trump is a paper tiger whose focus on short-term gains can be manipulated.”
Dealing with the range of US-China issues will require Trump to strike the right balance. So far, we haven’t seen the administration perform at that level.
The summit ends tomorrow. We’ll see what happens.
Peter Buxbaum is web editor of Global Trade.