- President Donald Trump’s top economic advisers will be in China on Thursday to try and cool the recent trade tensions between the two countries.
- The talks will likely center on the US-China trade deficit and the trade of technology between the two countries.
- They could lead to a battle inside the US delegation between free traders and protectionists.
A cadre of President Donald Trump’s top trade advisers touched down in China on Thursday in an attempt to deescalate recent trade tensions between the world’s two largest economies.
The two countries’ recent back-and-forth on tariffs, and reports of more trade restrictions to come, have raised the specter of a trade war. While the US delegation is headed to Beijing in hopes of avoiding a negative economic outcome, the talks are likely to be contentious.
The group is made up of key figures in the Trump administration, including:
- Treasury Secretary Steven Mnuchin
- Commerce Secretary Wilbur Ross
- National Economic Council Director Larry Kudlow
- US Trade Representative Robert Lighthizer
- White House National Trade Council Director Peter Navarro
At a US Chamber of Commerce event on Tuesday, Lighthizer downplayed expectations for the trip.
“I’m always hoping but not always hopeful,” Lighthizer said. “It’s a big, big challenge.”
What the two sides want out of the meeting
The US delegation’s trip comes at a pivotal moment in US-China trade relations. Over the past two months, Trump has announced multiple rounds of tariffs that hit China square on the chin. And the Chinese government has responded in kind.
Reports of possible additional actions targeting Chinese investment in the US and Chinese firms in certain sectors have pushed the two countries closer to a trade war that could be damaging for the global economy.
According to the Wall Street Journal’s Lingling Wei and Bob Davis, the US delegation plans to go in with a hard-ball strategy, simply asking what China is willing to concede given Trump’s threats of additional tariffs and trade actions. The delegation assumes China will recognise that it has more to lose in a trade fight.
But the Chinese will likely not be easily intimidated. AChinese official told Reuters Wednesday that the country is not afraid of a protracted battle with the US.
“In the event of a trade war, we have a much greater ability to endure the consequences than the US,” the official said.
The two sides will also likely address two major long-term issues: technology transfers between the countries and the persistent trade deficit. Trump has long been obsessed with the US trade deficit with China, mentioning it in trade meetings and on Twitter.
Much of the recent back and forth on trade has focused on technology transfers between the two countries. The US justification for the tariffs on Chinese goods was that Chinese firms were stealing American intellectual property. At the same time, China is trying to open the US market to more of its home-grown tech companies.
Overall, the US delegations wants to open up the Chinese market to more US investment – a tall task that will be met with resistance.
Experts expect the meetings to produce little more than the promise of new dialogue between the two countries – but that could be encouraging, given the recent tough talk.
“This trip will be important in creating the framework for future talks, though the central challenge remains in conceptualizing what the ‘ask’ is from the Trump Administration that the Chinese could agree to,” said Chris Kreuger, a strategist at Cowen Washington Research Group. “At best, these meetings will provide for the creation of the new Trump Economic Dialogue.”
Trump praised his counterpart in China while previewing the trip on Twitter.
“Our great financial team is in China trying to negotiate a level playing field on trade!” Trump said. “I look forward to being with President Xi in the not too distant future. We will always have a good (great) relationship!”
Internal tug of war
Perhaps the most interesting element of the China trip is not the discussion between the Chinese and the US officials, but the internal dynamics of the US delegation.
It is split along ideological lines, and the fight between the two factions could be as indicative of the Trump administration’s policy going forward as anything that comes out of the meetings with the Chinese.
On the one side is the protectionists, Navarro and Ross, who favour tighter trade controls and are willing to do battle with other countries to bring down the US trade deficit. On the other side are the free traders, Mnuchin and Kudlow, who want to mitigate the president’s protectionists tendencies as much as possible.
Krueger said the hodgepodge opinions of the main players in China will create a “Star Wars bar scene of Trump’s economic team” and most of the debate in Beijing could be internal.
“Lighthizer and Navarro share Trump’s visceral view on trade: the most important aspect is the goods trade deficit. This is not the view of Mnuchin and Kudlow,” the strategist said. “This sets up a bizarre situation where the U.S. team may spend most of the talks negotiating among themselves.”
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