Trade

Trump’s trade boasts in Asia mask looming China problem

President Donald Trump may be boasting that his Asia trip will multiply into more than a “trillion dollars’ worth of stuff,” but the real work on trade has been left undone.

All his braggadocio on business deals struck on his trip belie the simmering trade tensions between the U.S. and China that many analysts believe will now come to the fore.

“For me, we’re moving inexorably toward the edge of the cliff,” said Dan Ikenson, head of the Cato Institute’s Center for Trade Policy Studies.

Despite Trump’s glee over $250 billion in corporate deals announced in Beijing, he personally had little hand in them and they collectively did nothing to address his main grievance over Chinese industrial policies that restrict American firms and contribute to the large trade deficit between the world’s two biggest economies.

Bloomberg did a detailed look at the deals announced during the stop in China and found many were non-binding commitments that could take years to materialize — if they do at all.

Trump may have “made it look like he was perfectly satisfied with that $250 billion haul, and the Chinese may think for a little while that they’ve bought some peace on the trade front. I don’t necessarily think that’s going to happen,” Ikenson said.

More telling, no Asian country agreed to launch bilateral trade negotiations with the United States, which Trump has said is his preferred form of trade pacts, noted Chad Bown, a senior fellow at the Peterson Institute for International Economics.

“I see this as a high-tech trade war that’s about to go down” — Dan Ikenson, head of the Cato Institute’s Center for Trade Policy Studies

“Trade agreements have to be agreed to by both sides, and so if the United States is only country that wants to do bilateral deals, it’s going to have a hard time finding dance partners,” Bown said. “I just didn’t see any positive signals coming out of other partners.”

The United States’ increasing isolation in the region was highlighted by the decision of the 11 remaining TPP countries in Vietnam this past weekend to try to move on with the pact. Trump had pulled out of TPP in late January, a move that alienated crucial allies like Japan and South Korea.

“What looked like the waving of a hand at these issues and the signing of superficial trade deals will then be reinterpreted as something he needed to do to fill the space during the trip,” Kennedy said.

History may look back on Trump’s five-nation trip as a long lovefest before the crackdown on China’s industrial policies. Looming over the administration are the investigations and reports it has launched into various aspects of trade including steel, aluminum and intellectual property. Many of those reports and results have been delayed for months but Trump may feel renewed pressure from his base to act.

If Trump pulls the trigger in any of those investigations and imposes restrictions on Chinese exports or investment, Beijing is certain to retaliate either by filing complaints through WTO or by taking its own measures.

“My sense is he is going to very quickly turn to a tougher line, particularly on China,” said Simon Kennedy, director of Project on Chinese Business and Political Economy at the Center for Strategic and International Studies. “It’s going to be a combination of targeting exports from the U.S., as well as [going after] American companies that have investments in China and making life much harder for them.”

In a speech last week in the Great Hall of the People, Trump was characteristically blunt about policies he blamed for the $350 billion goods trade deficit with China.

“We must immediately address the unfair trade practices that drive this deficit, along with barriers to market success,” Trump said. “We really have to look at access, forced technology transfer, and the theft of intellectual property, which just, by and of itself, is costing the United States and its companies at least $300 billion a year.”

Later in the trip, on Air Force One, he heightened expectations by invoking the work of his trade representative, Robert Lighthizer, and telling reporters “he’s going to town.”

Here in Washington on Tuesday, Sen. John Cornyn, the Senate’s No. 2 Republican, praised Trump’s remarks and adopted an equally tough line in a speech on legislation he has crafted with other lawmakers to make it harder for China acquire U.S. technology through investments in American companies.

“It’s time to wake up to the mounting risks,” Cornyn said. “China, too often, requires technology transfer as a quid pro quo for U.S. companies to access it’s own market. This approach puts the Chinese Communist Party in the boardroom of nearly every U.S. multinational company in the high-tech sector.”

In the past, groups like the U.S. Chamber of Commerce and the U.S.-China Business Council have had a restraining effect on administrations and lawmakers tempted to lower the boom on Beijing. But Ikenson said he fears that’s no longer the case because American companies are increasingly frustrated with the Chinese.

Trump’s potentially confrontational approach comes at a time when has alienated allies in the region.

“I see this as a high-tech trade war that’s about to go down,” Ikenson said. “The Chinese think they have a national security interest in achieving technological preeminence.”

One possibility is that they respond to a Trump move to restrict market access or investment by shutting American semiconductor companies out of the Chinese market, and handing it over to Japanese and South Korean firms on the condition they share their know-how, he said.

In addition, Trump’s potentially confrontational approach comes at a time when has alienated allies in the region.

Not only did he pull out of the TPP on his third day in office, but he has pressured South Korea into renegotiating a five-year-old trade that he believes is unfair and has harped on Japan to take steps to eliminate its $68.9 billion trade imbalance with the United States.

“My big concern is that we’re going to launch a bunch of trade actions but it’s going to be much more difficult to get the Chinese to bend, to relent, because of the U.S. standing there on its own,” Kennedy said.

Original Article

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