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Trump and China: What's at stake?
01:26 - Source: CNN

Story highlights

Trump faces his first major opportunity to make headway on his trade pledge

He wants to level the US-China trade relationship

Washington CNN  — 

President Donald Trump and his years-long rhetorical crusade against Chinese foreign trade abuses is finally colliding with the reality of face-to-face negotiation.

The real estate businessman is staring down his first major opportunity to make headway on his campaign pledge to level the terms of the US-China trade relationship as he meets for the first time with Chinese President Xi Jinping on Thursday.

While Trump’s longstanding rhetoric on the trading relationship will hang over the meeting, the encounter also comes as Trump nears three months in office having done little to make good on his bold promise to fundamentally alter the trading relationship.

Trump, it seems, has held his fire in favor of making a play to improve the trading relationship through direct talks. But how much will Trump be able to draw out of his counterpart?

While Trump has focused the brunt of his rhetoric on simply reversing the United States’ $347 billion trade deficit with China, experts say an improved trading relationship will rest not on China simply changing that top-line number, but fundamentally altering the role it plays in its economy.

The Chinese government plays a heavy hand in structuring its economy, moves that Trump and others have argued put US companies and manufacturers at a disadvantage against their Chinese counterparts. Trump’s attempts to change that reality come on top of years of attempts by previous administrations.

Lower expectations

The White House already sought Tuesday to lower expectations for Trumps and Xi’s first encounter.

Senior White House officials called the series of meetings at Trump’s opulent south Florida residence, Mar-a-Lago, an opportunity to “set a framework for discussion” of the trading relationship and begin the process of urging China to change policies that have led to “an uneven playing field for US companies.”

One official stressed that they did not view the meeting as an opportunity to “resolve any particular issue.”

“We don’t want to be unrealistic about that,” the official said.

Former US officials and experts on China and international trade said they were heartened to see that Trump had not made good on some of his boldest campaign pledges – like imposing double-digit tariffs on Chinese imports or labeling China a currency manipulator. The latter is now a moot point as China is no longer acting to devalue its currency to make its exports cheaper, but is instead trying to prop up its value.

“China is such a big deal that you really want to make sure that you think through your long-term strategy before you do anything. The fact that they haven’t done anything yet on China, I think, is a good sign,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics and former World Bank economist.

But experts also warned that Trump may be enticed by a Chinese public relations coup with little long-term value aimed at Trump’s eagerness for clear-cut “wins,” like a series of quick, pre-packaged Chinese announcements of investments in the US, or headline-worthy purchases of high-profile US products.

Rather than a willingness to make fundamental changes to their economies, experts said the Chinese were more likely to come bearing political enticements, like promises of investments in manufacturing plants.

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China grants Trump dozens of trademarks
02:09 - Source: CNN

“The risk is that the Chinese see President Trump as very transactional by nature and they would be all too happy to say, ‘OK tell us what you want us to buy of yours,’ rather than focus on the fundamental changes they need to make to their economy,” said Michael Froman, the former US Trade Representative under President Barack Obama.

Trump and his advisers have thus far signaled they will aim for more than just window dressing changes. A senior White House official said Tuesday the US will look to “reduce the systemic trade and investment barriers that they’ve created.”

Trump’s longstanding views

Beyond Trump’s own longstanding views of China’s damaging impact on the US, he is surrounded by a coterie of aides who view China’s economic rise in similar terms. Trump’s National Trade Council director Peter Navarro has argued Chinese trade abuses amount to economic war and produced a 2012 documentary film, “Death by China,” while Trump’s chief strategist Steve Bannon is a leading economic populist and has warned about the prospects of a military war between the US and China.

Last week, Trump signed two executive orders that many interpreted as an attempt to set the tone ahead of his meeting with the Chinese president. One order launched a report on the impact of trade abuses on the US’s trade deficit – of which China is the largest contributor – while the other called for stricter enforcement of the US’s anti-dumping laws, which Chinese companies have run afoul of relatively often.

But the orders don’t stack up when compared to Trump’s bold campaign talk of stopping China’s “rape” of the US.

Trump will now need to push Xi to reduce the Chinese government’s heavy-handed regulation of its economy to lower the barriers of access to its economy for US companies, said David Dollar, a China expert at the Brookings Institution.

Dollar and other experts said top targets for the United States’ efforts to level the playing field will also include addressing China’s abuse of US intellectual property, high tariffs on certain goods and stricter labor standards that make Chinese manufacturer’s more competitive.

But Dollar and other experts said they feared the US had already weakened its negotiating position before even arriving at the negotiating table.

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Donald Trump withdraws from TPP
02:46 - Source: CNN

TPP withdrawal

Most economists and China experts have argued that Trump’s move to withdraw the US from the Trans-Pacific Partnership trade agreement will only serve to embolden China.

The deal, spearheaded by the Obama administration, would have represented a clear statement of US influence in a region China has sought to dominate and would have raised labor and environmental standards in the region – putting Chinese manufacturers on a more level playing field should China choose to join the agreement, as it was likely to do.

“It was written very much as a way to signal to China explicitly these are the 21st-century trade rules that we want you ultimately to adhere to,” said Bown, the economist at the Peterson Institute.

Froman, the former US trade representative who led TPP negotiations, said shelving TPP “has certainly been a huge gift to China.”

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Trump: If China won't solve N. Korea, we will
01:52 - Source: CNN

North Korea

But any headway Trump hopes to make on advancing his trade agenda could also be overshadowed by the increasing urgency of North Korea’s nuclear program, which Trump views as the greatest threat to US national security.

Trump and his top advisers have ratcheted up their pronouncements on the issue, warning that the window to stop North Korea is quickly vanishing.

North Korea fires ballistic missile, US State Department says

Two days after Trump warned the US was prepared to act alone to stop North Korea if China refused to exert its influence on Pyongyang, a senior White House official warned that “the clock has now run out, and all options are on the table for us.”

The White House was torn on which issue would carry more importance. One senior administration official told CNN talk of the trading relationship would be the “No. 1” priority, but acknowledged that the President’s top advisers were split on whether trade or the North Korean threat should be at the top of the agenda.

And while Froman said the Obama administration “purposefully made it clear that we were not willing to trade off one issue for another,” Trump signaled a willingness to wrap trade talks into his efforts to enlist China’s help in halting North Korea’s nuclear program.

“I think trade is the incentive. It is all about trade,” Trump said when asked how he solicit Chinese cooperation on the issue.

But amid Trump’s tough talk on curbing Chinese trade abuses and reversing the US’ trade deficit with China in favor of boosting US manufacturing, Trump has yet to telegraph what he is prepared to offer China in return.