00:54 - Source: CNN
Trump wants to use Huawei case as leverage
Washington CNN  — 

President Donald Trump is facing a series of damaging revelations from the Russia probe and a major West Wing shakeup, but one thing seems to be going well for him right now: his trade talks with China.

Since the President met with his Chinese counterpart, Xi Jinping, two weeks ago in Argentina, China has delivered on an array of Trump’s promises, including lowering auto tariffs and restarting purchases of soybeans.

The moves amounted to a political gift from Beijing, even as the US presses ahead with the prosecution of a high-profile Chinese tech executive and looks to crack down on Chinese intellectual property theft and cybercrime.

Trump crowed about reports Friday that China’s economy is slowing, taking credit for damaging America’s top economic rival with his tariffs.

That was after he said in an interview Thursday with Fox News of China’s economy: “If it’s in trouble, it’s only in trouble because of me.”

But US markets took a nosedive Friday, dropping about 500 points at one point over concerns about the global repercussions of a Chinese economic slowdown. The decline extended a pattern over the last week that has frustrated the President, who has complained to advisers that Wall Street hasn’t responded positively to what he sees as a major step forward in US-China relations.

The volatility reflects investor uncertainty over whether Trump can close his deal – and anxiety that Beijing, which has so far proceeded on a positive track with trade talks, might change course if US enforcement moves take a bite.

For now, China has directed its anger at Ottawa, detaining two Canadians in the wake of the arrest of Huawei chief financial officer Meng Wanzhou in British Columbia in connection with a US investigation into Iran sanction violations.

Further heightening potential tensions between China and the US are pending indictments against Chinese government hackers by the Justice Department for violating a 2015 pact by stealing American intellectual property and a cyberattack on the Marriott hotel chain linked to Chinese-intelligence gathering efforts that affected nearly 500 million guests.

The Justice Department’s top national security official told lawmakers this week that the US “cannot tolerate a nation that steals the fruits of our brain power,” noting economic espionage costs the US $225 billion a year. “The playbook is simple: Rob, replicate and replace,” said Assistant Attorney General John Demers. In March, the Office of the US Trade Representative released a report on China’s actions, including routine intrusions into US commercial networks to obtain confidential business information.

“These are two sides of the same coin,” said John Negroponte, vice chairman of McLarty Associates and the first director of national intelligence under President George W. Bush. “What the President is saying is, ‘Look, my biggest worry is the merchandise trade deficit with China,’ and that is the main thing he wants to fix. But even if he makes progress on that front, he is still left with the issue of what he is going to do about the large-scale theft of our intellectual property and other unacceptable Chinese practices.”

A White House spokeswoman told CNN this week that the administration will continue to hold China and all other countries accountable for malign cyber activities.

But Trump himself created uncertainty this week by suggesting he might be willing to intervene with his own Justice Department if it would help advance trade talks, a highly unusual blurring of lines between the executive branch and law enforcement. “If I think it’s good for the country, if I think it’s good for what will be certainly the largest trade deal ever made – which is a very important thing – what’s good for national security – I would certainly intervene if I thought it was necessary,” Trump told Reuters in an interview.

Wendy Cutler, a managing director for the Asia Society who’s a former diplomat and negotiator for the Office of the US Trade Representative under President Barack Obama, said the President’s comments set a “dangerous precedent.”

“China has kept these issues so far with the US in separate lanes, and now sending a signal to China that it’s kind of all on the table, and maybe it can get all get muddled up,” said Cutler. “I think this can complicate the ability to achieve success in trade talks, not provide the leverage that the President is suggesting.”

Others with long experience in trade negotiations agreed.

“It’s really important for the US not to be perceived – even the perception of other countries – that the rule of law isn’t the rule of law, and it can be used as a negotiating bait would be a serious problem for the US,” said Rufus Yerxa, president of the National Foreign Trade Council and former deputy director general of the World Trade Organization.

Trump’s comments have also created additional heartburn in the US-Canada relationship.

Canadian Foreign Minister Chrystia Freeland said in Washington on Friday that she had discussed the Meng issue during her meetings at the State Department with Secretary of State Mike Pompeo and Defense Secretary James Mattis. Freeland said both sides agreed the most important thing to do was “uphold the rule of law” and ensure Meng’s right to “due process” in Canada is respected, and said it was important that the process remain “apolitical.”

Freeland said she also raised the issue of US tariffs on Canadian steel and aluminum, saying Ottawa views the tariffs as “unjust and illegal,” and believes they are “inconsistent” with the close relationship between the United States and Canada.

Aside from demanding Meng’s release shortly after her detention was made public, Beijing has been restrained in its comments, largely echoing Trump’s sunny tone on the progress of trade? talks.

This week China resumed buying US soybeans, placing an order for 1.2 million tons – one the largest orders ever placed in a single day, according to the US Department of Agriculture. That will help relieve pressure on Trump, who was forced to offer subsidies to farmers hurt by the trade war, but it won’t make up for the losses American soybean farmers have experienced. Exports to China, which was the biggest market for US farmers last year, are down about 97%. In July, China mostly stopped buying American soybeans in retaliation to Trump’s tariffs.

China also announced on Friday it would temporarily reduce tariffs starting Jan. 1 on imports of American-made cars as it seeks to work out a deal with the United States. The Chinese Finance Ministry said it would remove the additional 25% levy on car imports imposed after Trump imposed tariffs on Chinese products for three months, reducing it to 15%. The ministry described the step as a “concrete action” aimed at helping to bring about a “mutually beneficial new Sino-US trade order.”

But US-China experts said negotiations will depend on whether Beijing continues to keep cool, especially if hardliners interpret the Meng case and any further enforcement actions as attempts by the US to hold China back.

“There are going to be hardliners in Beijing who will see the purpose of the indictments as a means to limit the technology advancement of countries,” said Adam Segal, director of the digital and cyberspace policy program at the Council on Foreign Relations.

But, Segal added, it will be impossible for Trump to hobble existing US investigations, even if he wants to.

“Ambassador Robert Lighthizer and the Justice Department are going to follow through on their agreements, and they are going to pursue what they think are in the best interests of the United States, making it harder for the President to reverse course on them because he had a beautiful piece of chocolate cake,” said Segal.

CNN’s Jamie Crawford, Katie Lobosco and Jethro Mullen contributed to this report.