China Experts Say Trump Administration Divided on Approach to China
When Trump administration officials are in Beijing this week, there is going to be "a lot of stuff that's getting thrown at the wall," according to Evan Feigenbaum, vice chairman of the Paulson Institute at the University of Chicago. Feigenbaum, speaking on a panel about China's policies, said the Trump administration is complaining about bilateral deficits, intellectual property theft, Made in China 2025, non-tariff trade barriers and Chinese state-run firms buying U.S. tech companies. While most of the issues underlined in the Section 301 investigation are in the non-tariff trade barriers and IP theft areas, experts at the Washington International Trade Association event disagreed on whether President Donald Trump would declare victory after only a pledge to reduce the bilateral trade deficit.
"This is not necessarily about the trade deficit," said Paul Triolo, practice head of geo-technology at the Eurasia Group. "How do you put these things into a sophisticated off-ramp" for the Chinese? While the administration understands the broad set of trade problems the two countries have is much more than the trade deficit, he said "it's more important for Trump to be able to tweet: 'I got the deficit down.'" Feigenbaum said he thinks China will agree to reduce the deficit by $100 billion annually -- Trump's demand. "They can get there. It's not easy," he said. "For the president, that kind of seems to be the game."
Two of the panelists believe that the U.S. will implement tariffs on $50 billion in goods, because initial talks will not go far enough to satisfy Trump and U.S. Trade Representative Robert Lighthizer. Chris Johnson, Freeman Chair in China Studies at the Center for Strategic & International Studies, said Lighthizer thinks tariffs will provide leverage. "If you're going to go very hard like that, you better stick to it. Because if you wilt, it's game over," said Johnson, a former CIA China analyst.
Triolo said "there's a feeling at USTR [that] there has to be some blood on the floor before you get the negotiations behind the negotiations. We're probably going to see some tariffs imposed. I think this is going to be protracted." But like Johnson, he wondered if Trump would have the stomach to stick with what he started if the stock market tanks. "We're in for a roller coaster for the next several months," he said.
The export restrictions from the Bureau of Industry and Security on Chinese company ZTE (see 1804170018) over sales of telecom equipment to Iran and North Korea are likely to be followed by a similar order against China-based Huawei, Triolo said. ZTE phones rely on American-made chips. "I think the timing of those is not coincidental," he said. The Pentagon said on May 3 that Huawei and ZTE phones will not be sold on military bases.
The BIS action garnered little attention in America but was a bombshell in China. "It is not a simple punishment, but an attempt to deal a fatal blow to ZTE," wrote Li Zheng, an assistant researcher at a Chinese research institute associated with the Ministry of State Security, in an essay published May 3. "This extreme action made the Chinese people realize the high degree of imbalance in bilateral economic relations, and the possibility of the U.S. destroying the Chinese economy with trade tools and tricks. This sort of economic war has given rise to unprecedented distrust of the U.S. government among the Chinese people."