World

Donald Trump and Xi Jinping go head-to-head

If the US president expects significant economic climb-downs this week, he’ll be disappointed

April 03, 2017
Chinese President Xi Jinping ©Xinhua/SIPA USA/PA Images
Chinese President Xi Jinping ©Xinhua/SIPA USA/PA Images

Later this week, ‪on 6th-7th April, Presidents Donald Trump and Xi Jinping are scheduled to meet at Mar-a-Lago in Florida. Unlike previous meetings between the leaders of these two countries, which tended to be flagged a long time in advance, this one was confirmed only late last week. This suggests that the bar for a successful meeting has been set pretty low, and for good reason. US-Chinese relations are in any case frostier than they have been for a long time, the US side is being managed by President Trump’s son-in-law Jared Kushner, who has no experience of dealing with China, and the US, itself, currently has no China policy.

It is very likely that Trump will want to convey a different message to the Chinese President from the deferential, almost sycophantic one delivered by his Secretary of State Rex Tillerson when he met Xi Jinping very recently. If the last few days of tweets are anything to go by, Trump’s posture will not go down well. He has anticipated a “very difficult meeting” and insisted that the US can no longer tolerate “massive trade deficits and job losses.”

Whereas Trump’s predecessors both used highly respectful language towards China, welcoming its rising status and role in the global system, and looking forward to China’s playing a responsible role in the world system, Trump is likely to insist more forcefully that China must change. The Trump Administration speaks with multiple and often incoherent voices about China, but it will likely demand that the country become less protectionist and adopt a more restrained approach to international security, for example in the South China Sea.

It is possible that both Trump and Xi are playing down the significance of this meeting, so that small concessions on commerce can be played up. But we should not forget that Trump’s “America First” policy is about securing concessions from China on trade, currency arrangements and industrial policy and geopolitical strategy without offering much, if anything in return. The risk of a trade war may have receded a little since the early days of the presidency, as White House pragmatists have edged away their more ideological rivals. Silence has descended on, for example, the 45 per cent across-the-board tariff proposal, and on currency manipulation charges. A national trade strategy document also had more bellicose language removed before its final draft. Yet we cannot be certain that more aggressive trade policies will not resurface. After defeat over the repeal of Obamacare, and amid uncertainty over tax reform and infrastructure policies, the Executive will be looking for “wins” that don’t entail Congressional approval.

Trump would like nothing more than to be seen as a president who, by his own myopic standards, made a stand for American jobs and American companies. The threat or implementation of tariffs, the demand for fairer access to China’s automobile and other markets, more equitable treatment for US firms in China, relaxations of joint venture and intellectual property rules and so on would be a good start for him. It’s quite likely some or all of these will get an airing.

It is also worth remembering that while Trump may be looking to his Chinese counterpart for concessions on trade and economic matters, Xi Jinping is not going to arrive in Florida without his own demands. In the first instance, China will want to be seen to be treated with respect and addressed as an equal. There will be no discussion about Taiwan, for example, that the Chinese will sit through. The recent cosying up to Taiwan by both the US and Japan will have alarmed Beijing, which has already taken commercial reprisals against South Korea in relation to the deployment of the so-called THAAD missile system in that country.

Moreover, China wants the US to agree a bilateral investment treaty, which is about agreeing rules on better, fairer access to one another’s markets. It resents that the US (and European Union) did not grant it “market economy” status in the World Trade Organisation late in 2016, as it claims to have been promised. This is related to the conditions under which countries can be cited for “dumping” products and be referred to the WTO.

It has its own agenda about how to deal with North Korea, about which Trump is sounding more unilateralist and aggressive, and it certainly has its own designs on security and defence matters in the South China Sea. It is not for fun that Beijing has recently approved a major boost to the naval capacity of the People’s Liberation Army by agreeing the supply of large amphibious vessels, and boosting the marine corps fighting force from 20,000 to 100,000.

Similarly, while Trump has enough domestic issues to mean that an external distraction might be useful, Xi Jinping has his too. The Chinese economy appears to be in cruise mode in the run up to the important 19th Party Congress later this year. However, under the surface, not all is well. The authorities have tightened controls over capital movements to stop outflows, so far successfully, but no one knows for how long. They have imposed an array of controls and restrictions on shadow finance institutions and practices to lessen vulnerability to a crisis, but at the same time they continue to sanction rapid growth in lending. Property purchase restrictions have been introduced in China’s largest cities, and last week in Fuzhou, Xiamen and Hangzhou to address 20-30 per cent real estate inflation, but not for the first, or one imagines, the last time.

Logically, Trump and Xi should want to co-operate and compromise, since they both have compelling reasons not to let their self-evident rivalry escalate into further conflict. Politically, though, the contours look quite different.

The scope for agreement on North Korea, the South China Sea and trade and industrial policies looks limited or impossible. Trump and Xi may be able to announce a couple of initiatives to take potential disagreements off the front pages, but I wouldn’t expect Xi Jinping to make any significant concessions, certainly not in this year of the Party Congress. And perhaps not at all, if the US is looking for political and economic climb-downs, which the Chinese Communist Party could not agree. If despite this, Trump wants to sound and act tough, the question is only: how, and when will the retaliation begin?