Aug 23, 2019

Trump's China bind

Photo: Mandel Ngan/AFP/Getty Images

Sources close to President Trump tell Axios that the White House is in a China bind: A trade deal with China is "tough to improbable" in this deteriorating environment, with escalating security tensions between Washington and Beijing.

Why it matters: The biggest tool Trump has to pump the economy and the markets is a trade deal with China. But if anything, senior administration officials have turned harder against China in recent weeks.

This has less to do with trade than it does with national security, according to senior administration officials and sources briefed on the president’s thinking:

  • U.S. intelligence officials are worried about Hong Kong further deteriorating, and about the risk of the Chinese military overreaching in Hong Kong — and perhaps even in Taiwan.
  • Lots of members of Congress care about the U.S. protecting Taiwan from Chinese aggression, and Trump has enraged Beijing by increasing military sales to the Taiwanese from the Obama era.
  • And national security adviser John Bolton is a strong advocate for Taiwan.

Trump had been resisting chastising Chinese President Xi Jinping over his human rights abuses and his treatment of Hong Kong protesters. But he’s inched further toward criticizing the Chinese than he normally would in recent days.

  • Trump even hinted the Chinese wouldn’t get their trade deal unless they peacefully resolved the situation in Hong Kong — a move that pleasantly surprised China hawks.

When Secretary of State Mike Pompeo and Defense Secretary Mark Esper visited Australia earlier this month, they delivered an unequivocal message to senior Australian officials: The U.S. plans to forcefully push back against China’s destabilizing behavior in the Asia-Pacific.

  • Some left those meetings with the impression that the U.S. was serious about confronting China militarily.
  • Between the lines: This visit was important for the signals Pompeo and Esper sent, but didn’t get as much U.S. press attention as it deserved. (See Bloomberg's Aug. 4 story here.)

The bottom line: So if not a China trade deal, what then is left to juice Trump’s economy and stave off recession?

  • Tax cuts? Not going to happen.
  • Infrastructure? Not going to happen.
  • Federal Reserve rate cuts? Probably. But how much will these expected cuts actually achieve?

Go deeper: Trump says he is "the chosen one" to take on China in trade war

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