China’s President Xi Jinping is scheduled to meet with President Trump later this week at Mar-a-Lago and trade issues are expected to be at the top of their agenda. President Trump has already warned on Twitter that this meeting “with China will be a very difficult one in that we can no longer have massive trade deficits … and job losses.”
President Trump’s tweet shows how he views China primarily through a US-China trade imbalance lens, linked to American job losses. Trump’s trade worldview ignores the surpluses in trade in services and T-bills the US has with China. He also disregards jobs created by U.S. manufacturers that use inputs imported imported from China to produce higher value added products in the United States. See China. Friend Or Foe? Opportunity Or Challenge? Or, Why Can’t We All Just Get Along? President Trump also refuses to acknowledge (or recognize?) that the United States has lost more jobs to automation than to trade with China. Focusing too much on US-China bilateral trade deficits is an incomplete and misguided way of looking at a far more complex US-China trade relationship.
President Trump also seems to believe China will be willing to renegotiate terms with the US because it is so dependent on the US market. Though China does see the US as a very good and very important market for its goods, it is also true that China exports to all corners of the world and its home market consumer demand is also rapidly growing. China will not agree to massive trade concessions out of a desperate need for access to the US market.
President Xi also likely will be able to use this meeting to score points for his constituents back home. He will almost certainly demand that the U.S. treat China as a market economy, as promised fifteen years ago in the US-China WTO Accession agreement, even though he knows there is no way the U.S. will grant China market economy status under President Trump’s watch. China thus far has not overreacted to any of Trump’s blustery threats and has instead patiently waited to see what specific trade actions Trump orders. Until President Trump orders 45% tariffs on all Chinese imports or labels China a currency manipulator, President Xi will almost certainly continue taking what the international community will view as the high road and just keep firing off missives about how no one wins in a trade war. If though President Trump takes strong concrete actions against China at this week’s meeting, you can be certain China will quickly retaliate by taking its own trade action.
President Xi likely sees this meeting as an opportunity to elevate China’s standing as a more reasonable global market player than the United States and if President Trump continues to antagonize its global trading partners, China becomes a more attractive alternative trading partner. Loans from the China Development Bank and Export-Import Bank of China already have become the a very important source of foreign financing throughout Asia, Latin America and Africa. If Trump wants the U.S. to scale back from participating on the global stage, China is more than willing to step up and try to fill the void.
There will be plenty of posturing and both sides will get the sound bites they want to satisfy their core constituents at home, but it’s not clear what, if any, specific tangible takeaways either side will get from this meeting. Time will no doubt tell and we will be reporting back.This article was written by Adams Lee and published on China Law Blog. Original Post: http://www.chinalawblog.com/2017/04/what-to-expect-from-the-upcoming-trump-xi-mar-a-lago-meeting.html