Will Trump engage in 'tough talk' to extract trade favours from Xi?

Wringing market access from China is no easy task for Trump.

The Dollar Business Bureau

Even as the world awaits the outcome of the upcoming Trump-Xi meet with much apprehension, Trump's tweets have fanned the flames by giving the whole US-China affair a war-like aura.

"The meeting next week with China will be a very difficult one in that we can no longer have massive trade deficits and job losses. American companies must be prepared to look at other alternatives," one of his recent tweets said.

In a recent update, US businesses have asked for meaningful action instead of disruptive trade negotiations which may lead to a trade war. Nevertheless, the general sentiment is in favour of a 'tough talk' which will coerce China into giving market access and opening up its economy to MNCs.

To safeguard its position as the world's manufacturing hub, China needs to be weary of Trump's policies aimed at cutting down American investment in China and encouraging (by hook or by crook) American corporations to manufacture in the homeland instead. USA's $347 billion trade deficit with China, which forms about half the total trade deficit of America in 2016, is the target of Trump's anti-China rhetoric.

The big question is whether China is sufficiently threatened by the possibility of high tariffs to give in to Trump's demands. The last time Trump executed the famed 'Art of Deal' by questioning the one-China policy, the move backfired as US had to eventually reaffirm its commitment to one-China. What Trump has up his sleeve this time to wring trade favours from China, only time will tell.

China government’s subsidised industries and dumping practices remain at the forefront of deal making between the two nations, during the meeting schedule to take place on Thursday and Friday at Trump's Mar-a-Lago resort in Florida. While US Automakers see China's high tariffs on auto imports as unfair, tech firms are concerned about China's discriminatory cyber-security law that takes effect in June.

The possible retaliation from China has put the soybean producers of USA in jeopardy, as China is their largest export destination, making up for 62% of all soybean exports from US.

In the build-up to this meet, Trump has already signed two executive orders. The first one orders an investigation into definitive reasons behind US's massive trade deficit with as many as 16 countries. The second is meant to target evasion of duties by tightening border trade.

In a recent visit by German Chancellor Angela Merkel, Trump was seen at the zenith of his diplomatic demeanor, even though he had hitherto taken every opportunity to condemn the German leader for her pro-refugee policies and liberal agenda. Will a similar uneventful episode of 'all bark and no bite' resurface at the first meet with Xi? We shall soon find out.

 

The Dollar Business Bureau - Apr 05, 2017 12:00 IST
 
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