The US President went quiet on the subject during his recent Asia trip—but America’s trade deficit with China this year will be just shy of $370 billion. He’s not going to take that lying downby George Magnus / November 13, 2017 / Leave a comment
Donald Trump will be home in Washington this week after a long trip through Asia, the centrepiece of which was a visit to Beijing, where he was feted by President Xi Jinping. The latter offered his guest an unprecedented private dinner in the Forbidden City and a red carpet welcome in Tiananmen Square. If you were following these developments, you could be forgiven for thinking that Sino-US relations couldn’t be sweeter, but you’d be wrong. Now he’s home, there’s a high probability that Trump’s visceral opposition to China’s trade policies will propel initiatives already under way in Washington to get tougher with Beijing.
On the surface, it looks as though the trip to China went well. There were good photo moments and no awkward joint press conferences. In a volte-face from his rhetoric at home, Trump pleased his hosts by saying that he blamed his predecessors, not China, for the large US-China trade imbalance: the US’ trade deficit with China this year will be just shy of $370 billion. Trade deals worth $250 billion were proudly announced, ostensibly a big win for the US. Further, in an apparent move to open the finance sector up to US and other firms, China said that it had decided to lift the ceiling on the ownership by foreign financial firms of Chinese banks, asset management companies and insurance companies.
Yet, this news isn’t as good as it sounds. The bulk of the $250 billion comprised already signed agreements, non-binding memoranda of understanding, and possible transactions linked to investments that might bear fruit over long periods. Boeing, for example, booked an order for 300 planes, but it has a backlog of over 1000 on its books, and these almost certainly include many if not all of the 300. The biggest item was an $83.7 billion investment plan—not a deal at all—for China’s state-owned China Energy Investment Corp to invest in shale gas and chemical manufacturing in West Virginia over the next 20 years. No US companies are directly involved at all. What US companies really want is better access to China’s protected markets and better intellectual property rights protection, neither of which were mentioned or discussed, as far as we can tell.